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NO.  95-82472 


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Author: 


U.S.  Bureau  of 
Corporations 

Title: 

Conditions  in  the  Healdton 

Oil  Field.  March  15, 1915. 

Place: 

Washington,  D.C. 

Date: 

1915 


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MASTER    NEGATIVE   # 


COLUMBIA  UNIVERSITY  LIBRARIES 
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U.  S.    Bureau  of  corporations. 

...  Conditions  in  the  Healdton  oil  field. 
Washington,  Govt,  print,  off.,  1915. 


March  15, 1915. 


xiv,  116  p.    25 


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At  head  of  title:  Department  of  commerce.  Bureau  of  corporations. 
Joseph  E.  Davies,  commissioner. 

The  report  of  an  investigation  made  in  response  to  the  Senate  resolu- 
tion of  March  28,  1914,  authorizing  an  inquiry  into  the  causes  of  a  reduc- 
tion in  the  price  of  crude  oil  in  the  Healdton  field  on  the  part  of  the 
Magnolia  pipe  line  co.,  and  the  charges  of  discrimination  made  by  this 
company  between  different  oil  producers  in  the  field. 

1.  Healdton  oil  field,  Oklahoma.  2.  Magnolia  pipe  line  co.  i.  Title. 
II.  Title:  Healdton  oil  field.  ^ 


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DEPARTMENT   OF  COMMERCE 
BUREAU  OF  CORPORATIONS 


JOSEPH  E.  DA  VIES.  Commiwioner 


MS 


CONDITIONS 


IN  THE 


HEALDTON  OIL  FIELD 


LIBRABY 
SCHOOL  OF  BUSINESS 


MARCH  15.  1915 


WASHINGTON 

GOVERNMENT  PRINTING  OFFICE 

1913 


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LIBRARY 


School  of  Business 


DEPARTMENT  OF  COMMERCE 
BUREAU  OF  CORPORATIONS 

JOSEPH  E.  DAVIES.  Commi«ioner 


•  « 


CONDITIONS 


IN  THE 


HEALDTON  OIL  FIELD 


MARCH  15,  1915 


^      WASHINGTON 
GOVERNMENT  PRINTING  OFHCE 
1915 


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OOlsTTEN'TS 


ADDITIONAL  COPIES 

Of  THIS  PUBUCAHON  MAY  BE  PEOCURED  FBOX 

THE  SUPERINTENDENT  OF  DOCUMENTS 

GOVERNMENT  PRINTINQ  OFPICl 

WASHINGTON,  D.  C. 

AT 

16  CENTS  PER  COPY 


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Page. 

Letters  of  transmittal ▼i'^ 

Letter  of  submittal ^^ 

CHAPTER  I.— INTRODUCTION. 

Sec.  1.  Statement  of  questions  involved 1 

2.  Brief  history  of  the  Healdton  field 2 

CHAPTER  II.— CAUSE  OF  THE  REDUCTION  IN  THE  PRICE 
OF  HEALDTON  CRUDE  PREVIOUS  TO  MAR.  28,  1914. 

Sec.  1.  Conflicting  claims  of  producers  and  pipe  line  company 10 

Claims  of  the  producers 10 

The  pipe  line  company's  virtual  monopoly 10 

Alleged  intent  to  depress  land  values 13 

Alleged  intent  to  Repress  crude-oil  values 10 

Claims  of  the  pipe  line  company IT 

2.  The  specific  gravity  of  Healdton  crude  oil 20 

S.  Products  obtainable  from  Healdton  crude  oil 21 

The   difference   between   tests   for   the  different    methods  of 

re'fining    22 

The  laboratory  distilling  flash  tests 23 

The  laboratory  barrel-still  tests 29 

The  reflnery  runs 32 

4.  The  manufacture  of  lubricants  from  Healdton  crude  oil 38 

5.  The  presence  of  sulphur  in  Healdton  crude  oil 45 

6.  Comparative  value  of  products  of  Healdton  and  other  Oklahoma 

crude  oils 49 

Results  of  United  States  Bureau  of  Mines'  analyses 49 

Results  from  refinery  runs 51 

7.  Comparison   of  crude-oil   prices   in   the   Mid-Continent   field   for 

March  to  September,  1914,  inclusive 54 

8.  Comparison  of  the  prices  of  refined  products  with  that  of  Heald- 

ton crude  oil 56 

9.  The  Bureau  of  Corporations'  conclusion  relative  to  the  cause  of 

the  price  reductions 57 

m 


rv 


CONTENTS. 


CHAPTER  III.— CHARGES  AGAINST  THE  MAGNOLIA  PIPE 
LINE  CO.  IN  REGARD  TO  DISCRIMINATON. 

Page. 

Sec.  1.  The  legal  aspects  of  discrimination 59 

2.  General  discussion  of  the  charges  of  discrimination 63 

3.  Alleged  discrimination  in  favor  of  the  McMan  Oil  Co 68 

4.  Alleged  discrimination  in  favor  of  the  Corsicana  Petroleum  Co —  71 

5.  Alleged  discrimination  in  favor  of  the  Dundee  Petroleum  Co 72 

6.  Alleged  discrimination  in  favor  of  the  Paraffine  Oil  Co 74 

7.  The  production  from  Indian  allotment  lands 75 

8.  Statistics  of  production  and  pipe-line  runs  collected  by  the  Bureau.  81 

9.  Abandonment  of  the  discrimination  charges  at  the  Corporation 

Commission  hearing,  May  1  to  6 86 

10.  The  Bureau's  conclusions  relative  to  the  subject  of  discrimination.  89 


LIST  OF  TABLES. 


Page. 

1.  Holdings  of  Corsicana  Petroleum  Co.  in  the  Healdton  field  Oct.  7, 

1914 14 

2.  Laboratory  distilling  flask  analyses  made  to  determine  the  refining 

qualities  of  Healdton  crude  oil 24 

3.  Laboratory  barrel-still  tests  made  to  determine  the  refining  qualities 

of  Healdton  crude  oil 30 

4.  Results  of  refinery  tests  and  regular  refining  operations,  using  Heald- 

ton crude  oil . 36 

5.  Comparison  of  tests  made  to  determine  the  lubricating  qualities  of 

Healdton  crude  oil 40 

6.  Comparison  of  the  values  of  the  products  of  Healdton  and  Electra 

crude  oil  when  refined  to  produce  engine  oils 42 

7.  Comparative  value  of  products  of  Healdton,  average  Oklahoma  and 

Cushing  crude  oils,  based  upon  laboratory  analyses  of  the  United 
States  Bureau  of  Mines  (1  barrel  of  42  gallons  of  crude  oil) 50 

8.  Comparative  value  of  Healdton,  Cushing,  Glenn  Pool,  and  average 

Oklahoma,  light  Corsicana,  and  Electra  (Tex.),  and  Mansfield 
(La.)  crude  oils,  as  determined  by  regular  refinery  operations 
(based  upon  1  barrel  of  42  gallons  of  crude) 52 

9.  Price  of  different  kinds  of  Mid-Continent  crude  oil  at  wells,  Mar.  1, 

1914,  to  Sept.  30,  1914  (per  barrel  of  42  gallons) 55 

10.  Estimated  production,  pro  rata  proportion,  and  pipe-line  runs  on  the 

Indian  leases  in  the  Healdton  field,  Apr.  1  to  15 77 

11.  Production  and  pipe-line  runs,  Jan.  26  to  Mar.  22,  1914 82 

12.  Statement  of  pro  rata  of  production,  pipe-line  runs,  and  comparison 

of  pipe-line  runs  with  pro  rata  production.  Mar.  23  to  May  11, 

1914 84 


MSM 


LIST  OF  EXHIBITS. 


LETTERS  OF  TRANSMITTAL. 


* 


Page. 

1.  Order  of  the  Corporation  Commission  of  Oltlahoma,  prescribing  regu- 

lations governing  the  Healdton  field ^^ 

2.  Report  on  the  gravity  and  general  characteristics  of  Healdton,  Okla., 

crude  oil,  by  H.  L.  Wood,  for  the  Corporation  Commission  of  Okla- 
homa, Mar.  13,  1914 ^ 

3.  Affidavit  of  F.  V.  Faulkner  relating  to  early  conditions  in  the  Heald- 

ton field ^^ 

4.  Affidavit  of  D.  C.  Stewart  relating  to  early  conditions  in  the  Heald- 

ton field ^^ 

5.  Affidavit  of  E.  R.  Brown  relating  to  early  conditions  in  the  Healdton 

field,  and  letter  from  E.  E.  Plumly  to  E.  R.  Brown  concerning  tests 

of  Healdton  crude  oil ^^ 

6.  Letter  from  E.  E.  Plumly  to  E.  R.  Brown  relating  to  sulphur  in  Heald- 

ton crude  oil ^^^ 

7.  Telegrams  between  E.  R.  Brown  and  H.  C.  Folger,  jr.,  relating  to  sul- 

phur in  Healdton  crude  oil 1^2 

8.  Letter  from  E.  R.  Brown  to  E.  E.  Plumly  directing  a  test  to  be  made 

of  Healdton  crude  oil 1^3 

9.  Report  on  the  analysis  of  Healdton  crude  oil,  made  by  M.  C.  Whitaker 

to  the  United  States  Bureau  of  Mines 103 

10.  Statement  of  the  Magnolia  Petroleum  Co.,  showing  an  experiment  with 

45  gallons  of  Healdton  crude  In  determining  whether  or  not  cylin- 
der oils  can  be  in  a  practical  way  manufactured  from  Healdton 
crude  for  commercial  purposes 107 

11.  Statement  of  the  Magnolia  Petroleum  Co.,  showing  an  experiment  with 

1  barrel  of  Healdton  crude  for  the  purpose  of  determining  if  engine 

oils  can  be  manufactured  therefrom 109 

12.  Magnolia   Petroleum   Co.   statement   of    comparative    refining    costs 

(figures  taken  from  Corsicana  refinery  monthly  statements) 111 

13.  Affidavit  of  C.  R.  Stewart  relating  to  the  pipe  line  company's  method 

of  taking  oil  from  the  Healdton  field 112 

14.  Affidavit  of  Frank  Edington  relating  to  the  pipe  line  company's  method 

of  taking  oil  from  the  Healdton  field 113 

15.  Statement  of  Frank   Edington   relating  to  the  pipe  line  company's 

method  of  taking  oil  from  the  Healdton  field 114 

16.  letter  from  G.  W.  Jennings  to  Wirt  Franklin  concerning  conditions  In 

the  Healdton  field  Mar.  20,  1914 115 

VI 


« 


- 1 


Department  of  Commerce, 

Office  of  the  Secretary, 
Washington^  March  15^  1915. 
Sir  :  I  transmit  herewith  a  report  of  the  Commissioner  of  Corpora- 
tions on  Conditions  in  the  Healdton  Oil  Field  made  in  response  to  a 
resolution  of  the  Senate  of  March  28,  1914. 

Very  respectfully, 

William  C.  Eedfield, 

Secretary, 
The  President, 

Department  of  Commerce, 

Bureau  of  Corporations, 

Washington^  March  15,  1915. 

Sir:  I  have  the  honor  to  transmit  herewith  a  report  on  Conditions 

in  the  Healdton  Oil  Field,  prepared  at  your  direction  in  response  to 

a  resolution  of  the  Senate  of  March  28,  1914,  and  submitted  to  the 

President    in    accordance    with    the    law    creating   the    Bureau    of 

Corporations. 

I  desire  to  mention  as  especially  contributing  under  my  direction 
to  the  preparation  of  this  report  Messrs.  David  L.  Wing  and  Timothy 
A.  Carroll,  of  this  Bureau. 
Very  respectfully, 

Joseph  E.  Da  vies, 

Commissioner  of  Corporations. 

To  Hon.  William  C.  Redfield, 

Secretary  of  Commerce, 

m 


It  1 


LETTER  OF  SUBMITTAL. 


Department  of  Commerce, 

Bureau  of  Corporations, 
Washington  March  15^  1915. 

Sir:  I  have  the  honor  to  submit  herewith  a  report  dealing  with 
the  conditions  in  the  Healdton,  Okla.,  oil  field  (sometimes  called 
the  Ardmore  oil  field). 

This  report  is  made  pursuant  to  a  resolution  passed  by  the  Senate 
on  March  28,  1914,  which  directed  an  inquiry  into  the  cause  of  a  re- 
duction made  shortly  before  that  time  in  the  price  of  crude  oil  in  the 
"Ardmore"  oil  field  on  the  part  of  the  Magnolia  Pipe  Line  Co., 
whether  corresponding  changes  had  been  made  in  the  prices  of  the 
finished  products  manufactured  from  such  oil,  and  whether  discrimi- 
nations were  practiced  on  the  part  of  the  company  as  between  differ- 
ent producers  of  oil  in  the  field,  especially  against  the  oil  on  Indian 
allotments. 


'^  '(  ..^ 


THE   CONTROVERSY   BETWEEN  THE  PRODUCERS  AND  THE   PIPE   LINE. 

The  Healdton  oil  field  was  discovered  in  August,  1913.  Shortly 
after,  representatives  of  the  Magnolia  Petroleum  Co.  pronounced  the 
Healdton  crude  oil  to  be  a  high-grade  oil,  similar  to  that  from  the 
Electra,  Tex.,  field  and  the  northeast  Oklahoma  fields.  They  stated 
publicly  that  they  were  anxious  to  secure  a  large  daily  supply  and 
that  the  current  Oklahoma  crude-oil  price  at  the  wells  would  be  paid. 
The  Magnolia  Pipe  Line  Co.,  owned  by  the  same  interests  as  the 
Magnolia  Petroleum  Co.,  was  incorporated  under  Oklahoma  laws  to 
own  and  operate  a  pipe  line  in  that  State.  Its  pipe  line  connected 
at  the  Texas-Oklahoma  boundary  with  the  pipe  line  of  the  Magnolia 
Petroleum  Co.  By  January  26,  1914,  the  Magnolia  Pipe  Line  Co., 
which  had  erected  storage  tanks  in  the  field,  began  to  purchase  oil  and 
store  it,  in  anticipation  of  the  completion  of  its  pipe  line.  There  were 
then  in  the  field  about  15  producing  wells,  with  an  estimated  total 
daily  production  of  1,555  barrels  of  crude  oil.  On  January  26  the 
Magnolia  Pipe  Line  Co.  notified  the  producers  that  it  would  pay 
$1.03  per  barrel  at  the  wells  for  Healdton  crude  petroleum  testing  32° 
Baume  and  above,  which  was  the  current  Oklahoma  crude-oil  price. 
On  March  2,  however,  the  company  reduced  its  price  for  Healdton 

IX 


i  I 


X  LETTER   OF   SUBMITTAL. 

crude  oil  testing  less  than  32°  Baiime  scale  to  70  cents,  although  the 
current  Oklahoma  crude- oil  price  was  $1.05.  The  price  of  Healdton 
crude  petroleum  testing  32°  Baume  and  above  was  raised  from  $1.03 
to  $1.05  on  March  9.  The  pipe  line  company  later  notified  the  pro- 
ducers that  on  and  after  March  23  it  would  not  purchase  more  than 
4,000  barrels  daily,  and  that  it  would  prorate,  according  to  Oklahoma 
law,  the  quantity  taken  from  each  producer  in  the  proportion  of  his 
daily  production  to  the  total  production.  The  total  daily  production 
of  the  field  at  that  time  was  estimated  at  about  10,000  barrels.  On 
March  26  the  price  for  all  grades  of  Healdton  crude  oil  was  fixed  at 
70  cents  per  barrel.  On  April  13,  and  again  on  April  20,  addi- 
tional reductions  of  10  cents  per  barrel  were  made,  bringing  the  price 
of  Healdton  crude  oil  down  to  50  cents  per  barrel  at  the  wells.  Up  to 
January,  1915,  the  price  remained  unchanged.  In  each  instance  the 
reduction  in  price  was  defended  by  the  pipe  line  company  on  the 
grounds  of  the  inferior  refining  qualities  of  the  oil. 

Following  the  first  cut  in  price  (on  March  2),  the  producers  com- 
plained to  the  Corporation  Commission  of  Oklahoma,  which  sent  a 
special  inspector  to  the  Healdton  field  to  make  an  official  test  of  the 
gravity  of  the  crude  oil.  On  March  13,  1914,  the  commission  held  a 
hearing  at  Oklahoma  City,  at  which  the  producers  and  the  pipe  line 
company  presented  their  respective  sides  of  the  case.  The  report  of 
the  inspector  employed  by  the  commission  was,  on  the  whole,  adversa 
to  the  producers'  claim  that  the  company  was  not  justified  in  its 
action.  The  commission  decided  to  postpone  the  case  until  both  the 
producers  and  the  pipe  line  company  could  more  thoroughly  investi- 
gate the  refining  quality  of  the  crude  oil. 

Following  the  cut  in  price  to  50  cents  per  barrel  on  April  20,  the 
producers  laid  their  complaints  before  the  attorney  general  of  the 
State,  who  instituted  proceedings  against  the  Magnolia  Pipe  Line 
Co.  before  the  Corporation  Commission.  The  attorney  general 
charged  that  the  pipe  line  company  was  guilty  of  illegal  acts  in 
unreasonable  restraint  of  trade,  and  various  illegal  practices,  espe- 
cially discrimination  between  different  producers  in  its  purchases  of 
oil.  The  case  was  heard  before  the  Corporation  Commission  in  May, 
1914.  During  the  course  of  the  hearing  the  charge  against  the  pipe 
line  company  for  discrimination  between  producers  was  virtually 
abandoned.  Although  evidence  was  received  regarding  the  quality 
of  Healdton  crude,  the  commission  made  no  findings  on  the  subject. 
A  compromise  agreement  was  arranged  out  of  court  between  the 
producers  and  the  pipe  line  companies.  This  agreement  was  made  the 
basis  of  an  official  order  which  was  issued  by  the  Corporation  Com- 
mission on  May  7.  Among  other  things,  this  order  prescribed  the 
minimum  quantities  of  oil  to  be  daily  purchased  and  run  by  the  pipe 
line  company  from  the  field  between  certain  specified  dates.     An 


LETTER   OF   SUBMITTAL. 


XI 


iV 


»> 


inspector  for  the  Healdton  field  was  appointed  with  full  authority 
to  investigate  all  runs  of  oil,  to  ascertain  the  production  of  all  wells, 
and  to  apportion  the  amount  of  oil  which  should  be  taken  from  each 
producer  so  as  to  prevent  any  discrimination.  He  took  charge  of 
this  work  on  May  12, 1914. 

INVESTIGATION  BY  THE  BUREAU  OF  CMDRPORATIONS. 

In  the  consideration  of  the  questions  raised  in  the  Senate  resolu- 
tion the  Bureau  investigated  thoroughly  the  subject  of  the  refining 
value  of  Healdton  crude  oil.  It  secured  not  only  the  results  of  many 
laboratory  analyses  and  of  test  runs  made  on  a  small  scale,  in  minia- 
ture stills  holding  about  1  barrel,  and  by  refineries  on  a  large  scale, 
approximating  commercial  conditions,  but  it  also  secured  from  two 
refineries,  namely,  the  Magnolia  Petroleum  Co.'s  Corsicana  refinery 
and  the  Pierce-Fordyce  Oil  Association's  Fort  Worth  refinery,  the 
results  obtained  from  about  1,200,000  barrels  of  Healdton  crude  oiL 
which  were  the  only  important  quantities  of  Healdton  crude  refined 
in  the  course  of  regular  commercial  operations.  The  Bureau  also 
obtained  information  relating  to  the  prices  of  the  finished  products 
manufactured  from  Healdton  crude  oil. 

A  careful  investigation  was  made  into  the  question  of  whether  dis- 
crimination was  practiced  by  the  pipe  line  company  in  its  purchas- 
ing of  oil  from  different  producers  in  the  field,  and  particular  at- 
tention was  given,  in  this  connection,  to  the  subject  of  oil  produced  on 
Indian  allotments.  The  investigation  of  the  Bureau  of  Corpora- 
tions included  a  thorough  examination  of  the  books  and  records  of 
the  Magnolia  Pipe  Line  Co.  and  the  Magnolia  Petroleum  Co. 

VIRTUAL  MONOPOLr  OF  MAGNOLIA  PIPE  LINE  <X). 

The  Magnolia  Pipe  Line  Co.  from  January  26, 1914,  when  it  began 
to  buy  and  run  oil  into  its  pipe-line  system  in  the  Healdton  field,  up 
to  November,  1914,  had  a  monopoly  of  the  only  practical  means  of 
transporting  the  oil  from  the  field  to  a  refinery  market.  It  did  not 
transport  any  oil  as  a  common  carrier.  The  lack  of  marketing  facili- 
ties and  the  charges  for  transportation  were  such  that  the  producers 
preferred  to  sell  their  oil  at  the  wells  to  the  pipe  line  company,  and 
no  oil  was  offered  for  transportation. 

The  pipe  line  company  bought  all  the  oil  entering  its  pipe  line, 
stored  it,  transported  it  to  the  boundary  line  between  Oklahoma  and 
Texas,  and  sold  it  to  the  Magnolia  Petroleum  Co.,  an  allied  concern. 
The  Magnolia  Pipe  Line  Co.,  in  virtue  of  the  circumstances  which 
made  it  the  only  purchaser,  as  well  as  transporter  of  the  oil  produced 
in  the  Healdton  field,  in  fixing  the  price  which  it  would  pay  for  the 
oil,  at  the  same  time  fixed  the  market  price  for  all  the  oil  produced 
in  the  field. 


xn 


LETTER  OF  SUBMITTAL. 


REDUCTION  OF  PRICE. 


With  respect  to  the  cause  of  the  reductions  in  the  price  fixed  by 
the  Magnolia  Pipe  Line  Co.,  the  Bureau  finds  no  evidence  of  an 
intent  to  arbitrarily  depress  land  values  in  order  to  buy  oil-producing 
property  more  cheaply  or  to  acquire  stocks  of  oil  already  accumu- 
lated at  a  price  much  below  its  real  value.  It  is  true  that  officials 
of  the  Magnolia  Petroleum  Co.  early  in  the  development  of  the 
Healdton  field  made  exceedingly  favorable  statements  in  regard  to 
the  refining  quality  of  the  oil  and  said  it  was  a  high-grade  oil.  They 
assert  that  this  was  a  bona  fide  mistake,  and  the  evidence  of  the 
correspondence  in  the  files  of  the  Magnolia  Pipe  Line  Co.  and  the 
Magnolia  Petroleum  Co.  as  well  as  their  actions  support  this  con- 
tention. When  they  discovered  that  only  a  relatively  small  propor- 
tion of  gasoline  and  kerosene  could  be  obtained  from  it,  that  the  oil 
did  not  have  enough  lubricating  value  to  make  it  practicable  for 
them  to  use  it  for  the  manufacture  of  lubricants,  and  that  it  had  a 
relatively  high  percentage  of  fixed  sulphur,  to  remove  which  in- 
creased the  cost  of  refining,  the  Magnolai  Pipe  Line  Co.  made  the 
various  reductions  in  price.  This  was  done,  they  claim,  in  order 
to  put  the  f.  o.  b.  refinery  cost  of  the  crude  oil  from  the  Healdton 
field  on  a  competitive  basis  with  the  f .  o.  b.  refinery  cost  of  the  crudes 
from  other  fields  that  were  available  to  the  Magnolia  Petroleum  Co.'s 
refineries. 

The  Bureau  of  Corporations  finds  that  the  contention  of  the  pipe 
line  company  regarding  the  small  gasoline  and  kerosene  content  of 
the  crude  oil  produced  in  the  Healdton  field  is  correct.  It  is  of  the 
opinion  also  that  while  Healdton  crude  is  chemically  adapted  to  the 
manufacture  of  lubricants,  yet,  in  view  of  the  prices  at  which  other 
crudes  better  adapted  to  the  manufacture  of  lubricants  could  be 
bought  and  the  limited  market  for  the  lubricants  obtainable  from 
Healdton  crude,  its  lubricant  qualities  added  little  to  its  market 
value.  The  fixed  sulphur  which  is  found  in  the  Healdton  crude  is 
removable  from  the  gasoline  and  kerosene  by  methods  which  are  not 
unduly  expensive,  although  more  expensive  than  is  necessary  for 
other  competing  crudes.  The  sulphur,  however,  does  not  affect  the 
value  of  the  Healdton  crude  enough  to  justify  any  important  reduc- 
tion in  the  price  paid  for  the  oil.  In  brief,  the  conclusion  of  the 
Bureau  is  that  the  reductions  in  the  price  of  Healdton  crude  oil 
were  made  because  of  the  discovery  by  the  Magnolia  Pipe  Line  Co. 
of  its  small  gasoline  and  kerosene  content,  and  because  the  lubri- 
cating values  of  this  crude  were  not  enough  to  warrant,  under  exist- 
ing conditions,  its  use  for  the  manufacture  of  lubricants.  The  pipe 
line  company,  however,  does  not  appear  to  be  without  blame  for  its 
failure  to  determine  the  true  character  of  the  oil  at  an  early  date. 
This  would  have  saved  much  disappointment  to  producers. 


> 


i 


LETTER  OF  SUBMITTAL. 


PRICES  or  CRUDE  OIL  AND  FINISHED  PRODUCTS. 


xin 


In  regard  to  the  question  raised  in  the  Senate  resolution,  whether 
changes  were  made  in  the  prices  of  the  finished  products  manufac- 
tured from  Healdton  crude  oil  corresponding  to  the  changes  in  the 
price  of  the  crude,  it  should  be  noted  that  no  finished  products  from 
Healdton  crude  oil  were  marketed  until  about  the  latter  part  of 
April,  1914,  at  which  time  all  of  the  reductions  in  price  had  taken 

place. 

The  Bureau  has  made  comparisons,  based  on  the  total  value  of  the 
products  derived  from  them,  of  the  commercial  values  of  crude  oil 
produced  in  various  Oklahoma,  north  Texas,  and  north  Louisiana 
oil  fields.  It  has  made  such  comparisons  on  two  bases — first,  the 
yields  shown  by  the  analyses  made  by  the  United  States  Bureau  of 
Mines,  which  uses  a  standard  method  of  testing  for  all  kinds  of 
crudes,  and  second,  the  yields  shown  by  regular  refinery  operations. 
The  results  of  both  comparisons  show  that  the  products  derived  from 
Healdton  crude  are  distinctly  less  valuable  than  those  derived  from 
other  crudes  which  were  available  to  the  Magnolia  Petroleum  Co.'s 
refineries.  Consequently,  under  competitive  conditions  the  price  of 
Healdton  crude  would  naturally  be  lower. 

DISCRIMINATION  BETWEEN  PRODUCERS. 

In  considering  the  question  raised  in  the  Senate  resolution,  whether 
discriminations  were  made  by  the  Magnolia  Pipe  Line  Co.  between 
different  producers  in  the  Healdton  field,  and  especially  against  the 
oil  produced  on  Indian  allotments,  the  Bureau  has  limited  its  investi- 
gation to  the  p2riod  between  January  26,  the  date  that  the  pipe  line 
company  began  to  purchase  oil  from  the  producers  in  the  Healdton 
field,  and  May  12,  the  date  on  which  the  inspector  appointed  by  the 
Corporation  Commission  of  Oklahoma  took  charge  of  the  determina- 
tion of  the  quantity  of  oil  to  be  taken  by  the  pipe  line  company  from 
each  of  the  various  producers  in  the  field. 

The  Bureau  has  carefully  examined  all  of  the  testimony  in  the 
record  of  the  Corporation  Commission  hearing  in  May,  1914,  at 
which  time  the  charge  of  discrimination  was  officially  brought  before 
the  commission  in  the  complaint  filed  by  the  attorney  general.  Addi- 
tional evidence  bearing  on  this  subject  has  been  collected  by  the  Bu- 
reau. It  consists  of  information  gathered  in  interviews  with  persons 
in  a  position  to  know  the  facts,  of  sworn  statements,  and  of  statistical 
material  gathered  from  the  records  of  the  Magnolia  Pipe  Line  Co. 
and,  whenever  it  was  possible  to  obtain  it,  from  the  records  of  the 
producers  themselves. 


XIV 


LETTER  OF   SUBMITTAL. 


In  the  absence  of  any  Federal  statute  defining  what  constitutes 
discrimination  by  pipe  lines,  the  Bureau  has  based  its  work  on  the 
Oklahoma  statute  dealing  with  the  subject.  As  there  has  been  no 
judicial  construction  of  several  points  involved  in  the  application  of 
this  law  to  the  conditions  found  to  have  existed  in  the  Healdton  field, 
the  Bureau  has  been  obliged  in  answering  the  question  raised  by  the 
Senate  resolution,  to  apply  its  own  interpretation.  Under  the  Okla- 
homa law,  the  pipe  line  company  must  either  purchase  all  the  current 
output  of  each  producer  or  take  such  proportion  of  his  output  as  his 
production  bears  to  the  total  production.  The  pipe  line  company  is 
allowed  a  period  of  30  days  in  which  to  correct  inequalities. 

The  lack  of  definite  verifiable  records  dealing  with  the  production 
at  this  early  period  makes  it  difficult  to  determine  the  facts  exactly. 
Few  producers  had  any  such  records  and  the  records  of  the  Magnolia 
Pipe  Line  Co.,  while  accurately  showing  the  quantity  of  oil  taken 
from  each  producer,  contain  only  estimates  of  the  production,  and 
statements  of  doubtful  accuracy  concerning  the  oil  held  in  storage  in 
the  producers'  tanks.  The  pipe  line  company  at  this  early  period 
considered  itself  able  to  take  all  of  the  current  production  of  the  field 
without  difficulty  and  therefore  did  not  pay  special  attention  to  the 
matter  of  making  its  purchases  from  the  different  producers  in  pro- 
portion to  their  production. 

The  Bureau  found  no  evidence  of  any  intent  on  the  part  of  the 
pipe  line  company  to  discriminate  between  the  different  producers  or 
against  the  oil  produced  on  Indian  allotments.  The  Bureau  did  find, 
however,  that  at  various  periods  some  producers  may  have  been 
favored  at  the  expense  of  others.  Under  the  law  the  pipe  line  com- 
pany should  either  have  taken  the  total  production  or  should  have 
prorated  its  purchases  and  equalized  them  within  30  days.  In  the 
case  of  most  of  the  producers  temporary  inequalities  were  apparently 
corrected  within  the  legal  period.  The  unreliability  of  existing 
records  relating  to  production  and  the  unsettled  question  as  to  what 
legally  constitutes  discrimination,  preclude  a  positive  statement  in 
regard  to  the  subject. 

Very  respectfully, 

Joseph  E.  Da  vies. 

Commissioner  of  Corporations. 
The  President. 


.^ 


i . 


I      ' 


r  f 


i 


CONDITIONS  IN  THE  HEALDTON  OIL  FIELD. 


CHAPTER  I. 
INTRODUCTION. 

Section  1.  Statement  of  questions  involved. 

This  report  is  made  in  answer  to  Resolution  ISo.  319,  passed  by  the 
Senate  on  March  28, 1914.     The  resolution  reads  as  follows : 

Resolved,  That  the  Secretary  of  Commerce  is  directed  to  investigate  and 
report  to  the  Senate,  at  as  early  a  date  as  practicable,  as  to  the  cause  of  the 
recent  reduction  In  the  price  of  crude  oil  in  the  Ardmore  oil  field  in  the  State 
of  Oklahoma  on  the  part  of  the  Magnolia  Pipe  Line  Company ;  and  also  as  to 
Whether  corresponding  changes  have  been  made  in  the  prices  of  the  finished 
products  manufactured  from  such  oil. 
y  Second.  To  make  like  investigation  and  report  as  to  whether  discriminations 
are  practiced  on  the  part  of  said  company  as  between  different  producers  of  oil 
m  the  above-mentioned  field,  and  especially  as  to  whether  any  discrimination 
is  practiced  against  the  oil  produced  on  Indian  allotments. 

The  Ardmore  oil  field  referred  to  in  the  resolution  is  now  generally 
called  the  Healdton  oil  field. 

In  addition  to  answering  in  detail  the  various  questions  in  the 
resolution,  it  has  seemed  desirable  to  discuss  matters  not  directly 
mentioned  in  the  resolution,  but  which  are  necessary  to  a  clear 
presentation  of  the  situation. 

The  Magnolia  Pipe  Line  Co.  is  an  Oklahoma  corporation  which 
buys,  transports,  and  sells  crude  petroleum  obtained  from  the  Heald- 
ton field.  It  is  legally  distinct  from  the  Magnolia  Petroleum  Co.,  a 
Texas  corporation,  but  it  is  closely  connected,  however,  with  that 
company,  because  the  majority  of  the  stock  of  both  companies  is 
owned  by  the  same  interests  and  the  business  policies  of  the  Magnolia 
Pipe  Line  Co.  have  been  under  the  same  final  control  as  those  of  the 
Magnolia  Petroleum  Co.  Furthermore,  all  of  the  oil  bought  by  the 
Magnolia  Pipe  Line  Co.  and  transported  to  the  Texas  line  has  been 
sold  to  the  Magnolia  Petroleum  Co.  The  Corsicana  Petroleum  Co., 
which  is  one  of  the  oil-producing  companies  in  the  Healdton  field,  is 
also  closely  connected  with  the  Magnolia  Petroleum  Co.,  the  majority 
of  the  stock  of  both  companies  being  owned  by  the  same  interests  and 
the  business  policies  being  under  the  same  final  control. 

76568"— 15 1 


s 


CONDITIONS  IN   THE  HEALDTON   OIL  FIELD. 


The  information  for  this  report  was  obtained  through  interviews 
and  cx)rrespondence,  from  the  oflficial  reports  of  the  hearings  before 
the  Corporation  Commission  of  Oklahoma,  and  from  the  books  and 
records  of  companies  involved.  Representatives  of  nearly  every 
company  operating  in  the  Healdton  field  in  April,  1914,  were  inter- 
viewed by  agents  of  the  Bureau  of  Corporations,  and  information 
was  sought  from  them  on  all  of  the  various  questions  at  issue. 

Few  producers  were  able  to  furnish  definite,  first-hand  informa- 
tion in  regard  to  many  important  details  of  their  own  properties 
and  operations,  and  could  give  even  less  information  of  that  nature 
concerning  other  producers  in  the  field.  Concerning  such  details  as 
the  gravity  of  the  crude  from  their  wells,  the  exact  quantity  of 
daily  production,  and  the  quantity  of  oil  run  from  their  leases  dur- 
ing the  period  previous  to  May  12,  when  the  inspector  appointed  by 
the  Corporation  Commission  of  Oklahoma  took  charge  of  prorating 
the  production,  little  information  was  possessed  by  the  producers 
themselves.  Only  a  few  of  the  producers  had  taken  steps  to  have 
their  crude  oil  analyzed  by  chemists,  or  tested  by  refiners,  to  deter- 
mine its  quality. 

Since  the  producers  lacked  definite  records  which  would  throw 
light  on  the  questions  at  issue,  such  as  whether  discrimination  be- 
tween producers  took  place,  and  what  is  the  comparative  commercial 
value  of  the  crude  oil  based  on  its  yield  of  marketable  products,  defi- 
nite information  bearing  on  these  subjects  had  to  be  obtained  by  the 
Bureau  from  the  records  of  companies  handling  the  oil,  namely,  the 
Magnolia  Pipe  Line  Co.,  the  Magnolia  Petroleum  Co.,  and  the 
Pierce- For dyce  Oil  Association.  In  order  to  establish  the  accuracy 
and  reliability  of  such  information,  not  only  were  the  entries  in  the 
usual  permanent  records  examined,  but,  whenever  it  seemed  desir- 
able, search  was  made  through  the  original  daily  reports  of  employees 
concerning  the  quantities  of  crude  oil  run  and  refined,  and  concern- 
ing the  routine  tests  made  of  the  quality  of  the  oil.  Sales  of  prod- 
ucts from  Healdton  crude  were  traced  to  the  hands  of  bona  fide 
consumers  and  the  circumstances  concerning  such  sales  and  ship- 
ments ascertained.  The  information  obtained  from  the  Magnolia 
sources  has  been  scrutinized  closely  and,  wherever  practicable,  has 
been  tested  by  comparison  with  information  obtained  from  other 
sources.  In  some  instances  where  the  information  was  of  such  a 
nature  that  it  could  not  be  verified  by  existing  records  the  Bureau 
obtained  from  the  informants  sworn  statements  respecting  the  facts. 

Section  2.  Brief  history  of  the  Healdton  field. 

The  Healdton  field  (sometimes  referred  to  as  the  Ardmore  field) 
is  located  in  the  southwestern  part  of  Carter  County,  Okla.  It  is 
situat-ed  about  23  miles  west  of  Ardmore  and  about  26  miles  east  of 


INTEODUCTION. 


s 


Addington.  These  points  were  the  nearest  railroad  connections  at 
the  time  the  field  was  discovered.  Since  that  time,  the  construction 
of  the  Oklahoma,  New  Mexico  &  Pacific  Railway  from  Ardmore 
through  Wilson,*  about  5  miles  from  the  Healdton  field,  has  afforded 
a  nearer  railroad  connection. 

At  the  time  the  discovery  well  was  brought  in  (Aug.  6,  1913)  the 
nearest  through  pipe  lines  to  the  Gulf  of  Mexico  were  the  Magnolia 
Petroleum  Co.'s  pipe  line,  from  the  Electra  field  in  Texas,  the  nearest 
point  on  its  route  being  about  44  miles  distant  to  the  southwest ;  the 
Texas  Co.'s  pipe  line  from  the  same  field,  the  nearest  point,  Petrolia 
Station,  being  about  37  miles  distant;  and  the  Texas  Co.'s  pipe  line 
from  the  Cushing  field  to  the  Gulf,  about  69  miles  to  the  southeast. 
There  was  also  a  6-inch  pipe  line  running  from  the  Wheeler  oil  field 
to  Ardmore,  the  nearest  point  to  Healdton  on  its  route  being  about 
8  miles  to  the  northwest.  This  line  is  owned  by  the  Santa  Fe  Rail- 
road, and  was  used  to  carry  fuel  oil  to  Ardmore  from  wells  owned 
by  the  railroad. 

In  1912  the  Magnolia  Petroleum  Co.  projected  a  pipe  line  to  con- 
nect the  Cushing  field  in  Oklahoma  with  the  company's  refineries  in 
Texas.  The  proposed  route  brought  the  main  pipe  line  across  Okla- 
homa through  the  next  county  west  of  Carter  County,  and  made  it 
practicable  to  extend  a  branch  line  into  the  Healdton  field.  Soon 
after  the  discovery  well  of  the  Healdton  field  was  brought  in, 
representatives  of  the  Corsicana  Petroleum  Co.  visited  the  new  field, 
took  a  sample  of  the  oil,  and  made  attempts  to  buy  producing  land. 
Later,  D.  C.  Stewart,  then  manager  of  the  pipe-line  department  of 
the  Magnolia  Petroleum  Co.,  stated  to  the  producers  that  the  oil 
was  high  grade  and  that  the  company  needed  all  it  could  get  and 
would  pay  the  current  Oklahoma  price.  He  urged  producers  to 
bring  in  new  wells,  and  in  some  instances  they  were  furnished  the  use 
of  tanks  by  the  Magnolia  Petroleum  Co.  in  which  to  store  their  oil, 
pending  the  completion  of  the  pipe  line.  The  producers  had  to  pay 
the  expense  of  installing  these  tanks  and  had  the  option  of  buying 
them  later  on.  About  the  middle  of  December,  1913,  the  Magnolia 
Pipe  Line  Co.,  which,  as  already  stated,  is  owned  by  practically  the 
same  stockholders  as  the  Magnolia  Petroleum  Co.  and  the  Corsicana 
Petroleum  Co.,  was  organized  as  a  common-carrier  pipe  line  under 
the  Oklahoma  State  laws.  This  company  owns  an  8-inch  main  pipe 
line,  about  26  miles  long,  which,  connecting  at  the  Texas- Oklahoma 
boundary  with  the  Magnolia  Petroleum  Co.'s  pipe  line,  extends  to 
Addington,  Okla.,  from  which  point  a  6-inch  branch  pipe  line,  about 
26  miles  long,  was  laid  to  the  Healdton  field. 

In  the  Healdton  field  the  company  had  on  September  30,  1914, 
about  45  miles  of  gathering  lines,  three  55,000-barrel  steel  storage 

•  The  post  office  is  New  Wilson. 


4  CONDITIONS  IN   THE   HEALDTON   OIL   FIELD. 

tanks,  and  a  pumping  station.  It  also  had  pumping  stations  at 
Mud  Creek  and  Waurika,  Okla.  On  September  21,  1914,  the  Mag- 
nolia Pipe  Line  Co.  leased  from  the  Magnolia  Petroleum  Co.  the 
latter's  8-inch  pipe  line  and  its  equipment,  extending  from  the  Texas 
State  line  to  Fort  Worth,  Tex.  Two  55,000-barrel  steel  tanks  at 
Alvord,  Tex.,  and  four  55,000-barrel  steel  tanks  at  Fort  Worth  were 
part  of  the  equipment  leased.  The  distance  of  the  pipe  line  from 
Healdton  to  Fort  Worth  is  about  125  miles.  The  pipe  line  was 
opened  for  the  regular  business  of  transporting  oil  from  Healdton 
on  March  11. 

On  January  26,  1914,  the  date  on  which  the  Magnolia  Pipe  Line 
Co.  began  to  buy  and  store  oil  in  anticipation  of  the  opening  of  its 
pipe  line,  it  notified  producers  that  its  price  on  "Oklahoma  crude 
petroleum  32°  and  above"  would  be  $1.03  per  barrel  at  the  wells. 
This  was  also  the  prevailing  price  paid  at  that  time  by  the  large 
pipe-line  companies  in  the  other  Oklahoma  oil  fields. 

On  February  2,  1914,  the  price  of  Mid-Continent  oil  at  the  wells 
was  advanced  to  $1.05  per  barrel.  On  March  2,  1914,  the  Magnolia 
Pipe  Line  Co.  notified  the  producers  that  on  runs  of  March  2  and 
until  further  notice  their  price  on  Healdton  crude  under  32°  Baume 
test  would  be  70  cents  per  barrel  at  the  wells.  On  March  9  it  posted 
another  notice  stating  that  until  further  notice  the  price  on  Healdton 
crude  oil  32°  Baume  test  and  above  would  be  $1.05  per  barrel.  The 
company  claimed  that  this  distinction  in  price  on  the  basis  of  gravity 
was  made  because  it  had  found  that  a  considerable  part  of  the  oil  was 
heavy  and  fit  chiefly  for  use  as  fuel. 

There  was  much  dissatisfaction  on  the  part  of  the  producers  over 
this  action,  and  it  was  called  to  the  attention  of  the  Corporation 
Commission  of  Oklahoma.  The  commission  took  immediate  steps  to 
investigate  conditions  in  the  Healdton  field.  With  a  view  to  obtain- 
ing authentic  information  concerning  the  general  character  of  the 
Healdton  crude  oil  the  commission  sent  a  special  inspector  to  the 
Healdton  field  to  make  an  official  test  of  the  gravity  of  the  crude  oil. 
On  March  13,  1914,  it  held  a  hearing  at  Oklahoma  City  at  which  the 
producers  and  the  pipe-line  company  were  given  every  opportunity 
to  present  their  respective  sides  of  the  case.  According  to  the  report 
of  the  inspector  employed  by  the  commission  much  of  the  oil  tested 
was  found  to  be  under  32°  Baume.  He  called  attention,  moreover, 
to  the  odor  of  sulphur  noticeable  over  the  field,  and  gave  it  as  his 
opinion  that  the  Healdton  product  could  easily  be  rated  as  a  fuel  oil 
in  contradistinction  to  a  refining  oil.  (See  full  report  of  H.  L. 
Wood,  Exhibit  2,  p.  94.) 

After  hearing  the  testimony  the  commission  decided  that,  in  the 
absence  of  accurate  and  reliable  information  as  to  the  refining  quality 
of  the  crude  oil,  further  consideration  of  the  case  should  be  postponed 


•^ 


>* 


INTRODUCTION.  5 

until  such  time  as  both  the  producers  and  the  pipe-line  company 
could  make  a  thorough  investigation.  The  commission's  special  in- 
spector reported  an  estimated  total  daily  production  from  the  37 
producing  wells  in  the  field  of  about  7,000  barrels  a  day.  At  the 
hearing  the  question  of  the  ability  of  the  pipe-line  company  to  take 
care  of  the  total  production  of  the  field  was  raised  by  the  producers. 
In  reply  the  counsel  for  the  pipe-line  company  promised  that  it  would 
take  10,000  barrels  of  oil  per  day. 

Subsequently  the  pipe-line  company  gave  notice  that  commencing 
March  26  their  price  on  all  grades  of  Healdton  crude  would  be  70 
cents  per  barrel  at  the  wells.  They  also,  on  about  March  23,  gave 
oral  notice  that  the  pipe-line  company  would  take  only  4,000  barrels 
per  day  from  the  field.  At  this  time  the  estimated  daily  production 
of  the  field  was  about  10,000  barrels.  Following  their  purpose  to  cut 
the  price  of  the  crude  to  a  fuel-oil  basis,  additional  reductions  of 
10  cents  per  barrel  each  were  made  on  April  13  and  20,  thereby  bring- 
ing the  price  of  the  Healdton  product  down  to  50  cents  per  barrel. 
In  each  instance  the  reduction  in  price  was  defended  by  the  pipe-line 
company  on  the  grounds  of  the  heavy  character  and  inferior  refining 
qualities  of  the  oil.  The  50-cent  price  remained  unchanged  up  to 
January,  1915. 

The  action  of  the  pipe-line  company  in  placing  all  Healdton  oil, 
regardless  of  gravity,  on  the  basis  of  a  fuel-oil  crude,  the  subsequent 
two  10-cent  cuts  in  price,  and  the  reduction  of  the  quantity  of  its 
daily  runs  to  a  point  considerably  below  the  daily  production  of  the 
field,  aroused  much  opposition  on  the  part  of  the  producers.  At  the 
time  of  the  first  10-cent  cut,  on  April  13,  the  counsel  for  the  Mag- 
nolia Pipe  Line  Co.  addressed  a  meeting  of  the  Healdton  producers 
at  Ardmore.  He  outlined  various  plans  which  the  Magnolia  interests 
had  under  way  for  taking  care  of  the  oil,  such  as  the  building  of  a 
new  refinery  at  Fort  Worth,  Tex.,  especially  equipped  for  treating 
Healdton  oil,  the  erection  of  storage  tanks  at  Fort  Worth,  and  the 
increase  of  the  pipe-line  carrying  capacity  by  the  construction  of 
additional  pipe  line  and  pumping  stations.  When  questioned  as  to 
the  promise  made  by  him  at  the  March  13  hearing  of  the  Corpora- 
tion Commission  to  take  10,000  barrels  daily,  he  admitted  that  he 
had  made  a  mistake  because  he  did  not  then  understand  the  difficulties 
of  the  situation.  He  maintained,  however,  that  the  company's  tests 
since  March  13  had  showed  that  the  Healdton  crude  should  be  con- 
sidered a  fuel-oil  crude,  and  not  a  refinable  crude. 

The  cut  in  price  on  April  20  to  50  cents  per  barrel  and  the  con- 
tinued failure  of  the  company  to  increase  its  facilities  for  handling 
the  current  output  of  the  field,  thereby  throwing  on  the  producers 
the  burden  of  storing  their  surplus  oil,  aroused  the  producers  to  a 
high  pitch  of  dissatisfaction.     Their  leaders  complained  to  the  at- 


lFf*3P 


6 


CONDITIONS  IN   THE  HEALDTON   OIL  FIELD. 


torney  general  of  the  State,  who  immediately  filed  a  complaint 
against  the  Magnolia  Pipe  Line  Co.  before  the  Corporation  Com- 
mission of  Oklahoma.  The  attorney  general  charged  that  the  pipe- 
line company  was  guilty  of  illegal  acts  in  mireasonable  restraint  of 
trade,  and  had  engaged  in  forbidden  practices  in  purchasing  and 
piping  oil  from  the  Healdton  field,  including  discrimination  be- 
tween different  producers  in  its  purchases  of  oil.    (See  p.  67.) 

The  Magnolia  Pipe  Line  Co.  filed  an  answer  denying  specifically 
most  of  the  allegations  in  the  bill  of  complaint.  (See  p.  66.)  The 
case  was  heard  before  the  Corporation  Commission  from  May  1  to 
6,  inclusive.  During  the  course  of  the  hearing  the  charge  against 
the  company  of  discrimination  between  producers  in  running  the 
oil  from  the  field  was  virtually  abandoned.  Much  conflicting  testi- 
mony was  offered  in  regard  to  the  quality  of  Healdton  crude,  but 
none  of  it  was  considered  conclusive  enough  by  the  commission  to 
warrant  its  making  a  decision,  and  further  investigation  was  held 
to  be  necessary.  The  questions  of  increased  pipe-line  facihties  and 
additional  tankage  for  the  storage  of  the  surplus  oil  were  gone  mto 
at  length.  Finally  a  compromise  agreement  was  arranged,  out  of 
court,  on  May  5  between  the  producers  and  the  counsel  for  the  pipe- 
line company.  A  part  of  this  agreement  was  embodied  in  an  official 
order  (Order  No.  814)  which  was  issued  by  the  Corporation  Commis- 
sion on  May  7, 1914.    (See  Exhibit  1,  p.  91.) 

In  this  order,  the  Corporation  Commission  directed  that  the  Mag- 
nolia Pipe  Line  Co.  should  within  a  week  from  May  5,  1914,  begin 
taking  a  daily  average  of  8,000  barrels  of  oil  from  the  Healdton  field, 
and  on  or  before  July  1, 1914,  and  until  April  1, 1915,  should  not  take 
less  than  a  daily  average  of  12,000  barrels  of  oil  from  said  field ; 
that  it  should  immediately  erect  four  55,000-barrel  steel  tanks  in 
the  Healdton  oil  field,  and  that  in  addition  to  the  daily  average 
runs  of  oil  above  mentioned,  it  should,  as  per  its  agreement,  clear 
the  leases  of  all  stocks  of  accumulated  oil  which  were  in  a  merchant- 
able condition,  and  pay  the  owners  of  same  upon  delivery  at  the 
rate  of  50  cents  per  barrel  for  quantities  delivered. 

The  Magnolia  Pipe  Line  Co.  was  released  from  its  obligations 
under  the  State  law  as  a  common  purchaser  from  the  necessity  of 
connecting  with  any  new  wells  within  six  months  from  the  date  of 
the  order,  except  under  certain  specified  conditions.  It  was  ordered 
to  provide  a  pipe-line  connection  and  loading  facilities  on  the  main 
line  of  the  Chicago,  Eock  Island  &  Pacific  Railway  Co.  at  or  near 
Addington  (afterwards  this  order  was  modified  to  permit  the  plac- 
ing  of  the  loading  rack  at  Waurika,  instead  of  Addington)  and  to 
establish  a  reasonable  rate  per  barrel  for  the  transportation  of  oil 
from  the  Healdton  field  to  this  point  when  offered  for  such  trans- 
portation in  carload  lots. 


'  V 


INTRODUCTION.  1 

An  inspector  for  the  Healdton  field  was  appointed  with  full  au- 
thority to  investigate  all  runs  of  oil,  to  ascertain  the  production  of 
all  wells,  and  to  apportion  the  quantity  of  oil  which  should  be 
taken  from  each  producer  so  as  to  prevent  any  discrimination. 
One-half  of  his  salary  was  directed  to  be  paid  by  the  producers  and 
one-half  by  the  Magnolia  Pipe  Line  Co.  It  was  also  provided  that 
should  the  commission,  during  the  life  of  this  order,  issue  an  order 
fixing  the  price  of  oil  in  the  Healdton  field,  the  present  order  (Order 
No.  814)  would  become  void  when  such  new  order  fixing  prices  be- 
came effective. 

Some  of  the  provisions  in  the  agreement  between  the  producers 
and  the  pipe  line  company  were  not  stated  in  the  order.  It  was 
provided  in  the  agreement  that  it  was  not  to  be  construed  as  a 
violation  thereof  if  the  company  were  temporarily  prevented  from 
taking  the  stipulated  average  runs  of  oil  by  reason  of  strikes,  fire, 
flood,  or  other  causes  over  which  it  had  no  control.  Also  there  was 
a  clause  in  the  agreement  offering  the  use  of  the  Corsicana  refinery 
of  the  Magnolia  Petroleum  Co.  for  a  test  run  of  the  oil  under  the 
supervision  of  the  Corporation  Commission. 

The  order  of  the  commission  was  accepted  by  all  interested 
parties,  and  steps  were  taken  to  give  it  immediate  effect.  The  in- 
spector appointed  by  the  commission  made  such  arrangements  as 
were  possible  under  the  circumstances  to  prorate  the  runs  according 
to  the  production  of  each  lease,  pending  the  taking  of  an  official 
gauge  of  the  wells.  Drilling  operations  were  arranged  to  conform 
with  the  purpose  and  intent  of  the  order,  and  the  pipe  line  com- 
pany took  steps  to  comply  with  the  requirements  relating  to  its 

operations. 

Soon  after  entering  on  his  duties  the  inspector  appointed  by  the 
Corporation  Commission  made  arrangements  to  take  an  official 
gauge  of  the  field.  The  result  of  this  gauge  showed  an  estimated 
daily  production  for  the  field  of  49,596  barrels.  In  the  following 
table  is  shown  certain  statistical  information  contained  in  the  in- 
spector's monthly  reports  to  the  Corporation  Commission  regarding 
the  number  of  wells  and  their  estimated  daily  production  at  various 
dates : 


Date. 

Wells 
reported. 

Estimated 

daily 
production. 

Date. 

Wells 
reported. 

Estimated 

daily 
production. 

1014. 
June  r241        

Barrels. 
49,596 
53,085 
58,231 
58,431 
65,460 

1914. 
September  25 

255 

259 
263 

268 

Barreli. 
65,171 

Jiilv2.^        

October  24 

66,173 

AiiCTiicf  OA 

242 
242 
256 

November  25 

68,855 

A  IKTllCf  9(> 

December  24 

68,058 

Aug  US  I  *0 

Seotember  24    

8 


CONDITIONS  IN   THE   HEALDTON   OIL  FIELD. 


On  June  9,  at  a  hearing  of  the  Corporation  Commission  at  Okla- 
homa City,  Irving  C.  Allen,  petroleum  chemist  of  the  United  States 
Bureau  of  Mines,  gave  testimony  concerning  the  results  of  analyses 
made  by  the  Bureau  of  Mines  of  crude  oil  from  the  Healdton  and 
other  Oklahoma  fields  and  the  relative  values  of  the  different  crudes. 
No  action  on  the  subject  was  taken  by  the  commission  at  this  hearing. 

In  August,  owing  to  the  disruption  of  the  export  trade  and  finan- 
cial disturbances  caused  by  the  European  war,  the  Magnolia  Pipe 
Line  Co.  concluded  that  it  could  not  handle  the  quantity  of  oil  it 
was  required  to  run  by  the  order  of  the  Corporation  Commission 
of  May  7,  and  with  a  view  to  obtaining  relief  a  conference  was  ar- 
ranged with  the  producers  on  August  14  at  Ardmore,  Okla.  At  this 
conference  Corporation  Commissioner  George  A.  Henshaw  objected 
to  any  further  reduction  in  the  price,  and  a  supplementary  agreement 
was  entered  into  between  the  Magnolia  Pipe  Line  Co.  and  the  produc- 
ers. By  this  agreement  the  pipe  line  company  was  permitted  to  reduce 
the  quantity  of  oil  to  be  run,  beginning  September  1,  1914,  from 
12,000  barrels  to  8,000  barrels  per  day  until  January  1,  1915,  and 
furthermore,  the  producers  agreed  to  accept  part  payment  for  their 
oil  in  scrip  issued  by  the  pipe  line  company,  bearing  interest  at  the 
rate  of  6  per  cent  per  annum. 

In  the  latter  part  of  the  month  an  electrical  storm  started  what 
proved  to  be  one  of  the  most  disastrous  fires  that  ever  visited  the 
Oklahoma  oil  fields.  Practically  every  producer  in  the  Healdton 
field  suffered  more  or  less,  the  total  quantity  of  oil  destroyed  being 
estimated  at  from  375,000  to  400,000  barrels. 

About  September  30  the  Magnolia  Pipe  Line  Co.  served  notice  on  the 
Corporation  Commission  and  the  attorney  general  of  Oklahoma  that, 
beginning  October  6,  the  price  of  Healdton  crude  would  be  reduced 
to  40  cents  per  barrel.  The  Corporation  Commission  immediately 
issued  an  order  forbidding  the  Magnolia  Pipe  Line  Co.  from  pur- 
chasing or  receiving  or  transporting  oil  for  which  it  had  paid  or 
agreed  to  pay  less  than  50  cents  per  barrel,  and,  furthermore,  for- 
bidding the  producers  to  sell  their  oil  at  less  than  50  cents  per  barrel, 
and  warned  them  that  if  oil  held  in  storage  should  be  sold  for  less 
than  that  price,  the  producer  would  be  penalized  in  the  quantity  taken 
by  the  pipe  line  company  at  the  next  prorating.  Pending  the  hearing 
of  the  Corporation  Commission  in  the  matter  of  the  proposed  reduc- 
tion in  price,  the  Magnolia  Pipe  Line  Co.  did  not  put  the  new  price 

into  effect. 

The  hearing  took  place  at  Ardmore,  Okla.,  on  October  22  and  23. 
The  Magnolia  Pipe  Line  Co.  presented  a  number  of  witnesses  who 
testified  as  to  the  operations  of  the  company.  The  cost  of  raising 
crude  oil  to  the  surface,  cost  of  gathering,  overhead  costs,  etc.,  were 


INTRODUCTION. 


9 


discussed,  and  particular  attention  given  to  the  quality  and  refining 
value  of  products  obtainable  from  Healdton  and  Cushing  crudes. 
With  a  view  to  disposing  of  the  controversy  over  the  price  of  the 
Healdton  crude.  Corporation  Commissioner  Henshaw  tried  to  induce 
the  producers  and  the  pipe  line  company  to  consent  to  the  establish- 
ment of  a  permanent  differential  between  the  two  crudes,  making 
the  price  of  Healdton  crude  20  per  cent  lower  than  the  Cushing 
crude,  so  that  the  price  of  Healdton  crude  would  be  automatically 
governed  by  the  price  paid  for  the  Cushing  oil.  The  pipe  line  com- 
pany, however,  declined  to  accept  this  plan,  stating  that  while  this 
ratio  of  difference  might  then  obtain  such  a  condition  might  not 
prevail  at  some  future  time. 

At  the  close  of  the  hearing  the  Magnolia  Pipe  Line  Co.  announced 
that  it  would  continue  to  take  Healdton  crude  at  50  cents  a  barrel 
in  such  quantities  as  it  could  use,  estimating  the  runs  at  from  6,000 
to  8,000  barrels  a  day.  No  order  was  issued  by  the  commission. 
The  net  result  was  that,  while  the  price  of  50  cents  per  barrel  was 
continued,  the  company  was  required  to  take  only  such  part  of  the 
production  as  it  might  need  to  fill  current  requirements. 

In  October  the  pipe  line  company  finished  running  the  "stock'' 
or  storage  oil,  which  it  had  agreed  to  take  from  the  leases  in  accord- 
ance with  the  Corporation  Commission's  Order  No.  814  of  May  7, 
directing  that  in  addition  to  the  daily  average  quantity  of  oil  which 
was  stipulated  in  the  order  the  Magnolia  Pipe  Line  Co.  should,  in 
compliance  with  the  agreement  which  that  company  had  made  with 
the  producers,  clear  the  leases  of  all  "  stock  "  oil  accumulated  up  to 
May  5  which  was  in  merchantable  condition  and  pay  50  cents  a  barrel 

for  it. 
On  November  25,  the  Corporation  Commission  issued  Order  No. 

878,  which  permitted  the  producers  to  sell  their  "  stock  "  (accumu- 
lated storage)  oil  at  30  cents  per  barrel. 


BEDUCTION  IN   CRUDE  OIL  PBIOB. 


XI 


CHAPTER  11. 

CAUSE  OF  THE  REDTJCTIOW  IN  THE  PEICE  OF  HEALDTON  CEXTDE 

PREVIOUS  TO  MARCH  28,  1914. 

Section  1.  Conflicting  claims  of  producers  and  pipe  line  company. 

The  language  of  the  Senate  resolution  passed  on  March  28,  1914 
(see  p.  1),  calls  for: 

The  cause  of  the  recent  reduction  in  the  price  of  crude  oil  in  the  Ardmore 
[Healdton]  oil  field  in  the  State  of  Oklahoma  on  the  part  of  the  Magnolia  Pipe 
Line  Company. 

As  already  stated  in  the  historical  outline  of  the  Healdton  field, 
there  were,  previous  to  March  28,  two  reductions  in  the  price.  The 
first  took  place  on  March  2,  when  the  price  of  Healdton  crude  test- 
ing under  32°  gravity  Baume  standard  <»  was  reduced  from  $1.03  to 
$0.70  a  barrel ;  the  second,  on  March  26,  when  the  price  for  all  crude 
from  the  Healdton  field  regardless  of  Baume  test  was  fixed  by  the 
company  at  $0.70  a  barrel. 

Claims  of  the  producers. — The  causes  alleged,  on  the  part  of  the 
producers,  for  the  Magnolia  Pipe  Line  Co.'s  action,  were  the  same  in 
the  case  of  both  reductions.  These  reductions  were  claimed  by  them 
to  be  the  result  of  an  endeavor  of  the  pipe  line  company,  by  use  of 
its  monopolistic  power  in  the  field,  to  depress  the  value  of  oil- 
producing  property  and  of  unproven  territory  where  the  prospects 
for  production  seemed  favorable,  by  a  lowering  of  prices,  with  a 
view  to  buying  it  cheap  through  the  medium  of  allied  producing 
companies;  also  to  acquire  at  a  low  price  the  large  stocks  of  oil 
already  above  ground,  or  known  to  be  available  from  wells  then  exist- 
ing in  the  field. 

The  pipe  line  company''8  virtual  monopoly, — ^Both  charges  involve 
the  status  of  the  Magnolia  Pipe  Line  Co.  in  the  Healdton  field. 
The  Oklahoma  law,  under  which  the  company  must  operate  its  pipe 
line,  requires  it  to  be  a  common  carrier  and,  if  it  buys  oil,  a  common 
purchaser,  without  discrimination,  from  all  producers  in  the  field. 
This  provision  is  contained  in  an  act  which  took  eflFect  March  27, 
1909,  popularly  known  as  the  Yeager-Strain  Law,  to  which  all  pipe 
lines  engaged  in  transporting  crude  petroleum  or  its  products,  in 

•  While  in  its  notice  of  Jan.  26  the  price  posted  by  the  company  was  for  "  Oklahoma 
crude  petroleum  32°  and  above,"  the  records  show  that  for  all  oil  taken  into  its  lines  by 
the  company  prior  to  March  2,  one  price  was  paid  without  regard  to  any  gravity  test. 

10 


intrastate  commerce,  are  made  subject.  The  Magnolia  Pipe  Line 
Co.  bought  the  oil  before  transporting  it,  and  thus  came  under  the 
provision  of  the  law  requiring  it  to  be  a  common  purchaser.  It 
therefore  had,  by  virtue  of  the  character  of  its  business,  certain  obli- 
gations of  a  public-service  nature,  and  in  the  conduct  of  its  affaus 
its  freedom  of  action  was  limited  to  that  degree. 

The  attitude  of  the  producers,  in  relation  to  the  monopolistic  con- 
trol  which  they  claimed  was  exercised  by  the  Magnolia  Pipe  Line  Co. 
in  the  Healdton  field,  is  well  stated  in  the  complaint  against  the 
company,  filed  by  Attorney  General  West  before  the  Corporation 
Commission  and  considered  by  it  at  its  hearing  of  May  1-6,  1914. 
In  his  bill  of  complaint  he  set  forth— 

that  the  defendant  is  the  only  pipe  line  company  engaged  in  the  transportation 
of  oil  from  said  Healdton  Field;  that  it  handles  many  thousands  of  barrels 
dally,  and  that  by  reason  of  the  nature  and  extent  of  its  said  business  and 
the  existence  of  a  virtual  monopoly  therein,  is  such  that  the  public  must  use 
the  services  of  said  defendant  and  its  product  of  oil,  produced,  piped,  bought 
and  sold,  at  the  city  of  Ardmore  and  Carter  County,  as  to  make  its  said  busi- 
ness of  public  consequence,  and  to  affect  the  community  at  large,  as  to  its 
supply,  demand  and  price  or  rate  thereof,  so  that  said  business  is  a  public 
business  subject  to  be  controlled  by  the  State,  by  the  Corporation  Commission, 
as  to  all  of  its  practices,  prices,  rates  and  charges,  as  defined  by  Section  8235,« 
Revised  Laws  of  Oklahoma,  1910,  and  that  it  is  now  a  common  carrier  and 
common  purchaser,  under  the  lav^,  of  all  oil  being  produced  in  and  piped  from 
said  Healdton  Oil  Field. 

The  answer  filed  by  the  Magnolia  Pipe  Line  Co.  denies  that  it  is 
a  virtual  monopoly.    It  states  on  this  subject: 

The  Magnolia  Pipe  Line  Company  denies,  however,  that  it  is  a  virtual 
monopoly  in  the  purchase  and  transportation  of  oil  in  said  field,  or  that  the 
public  must  use  its  service,  or  that  its  business,  except  its  transportation 
business  proper,  is  of  public  consequence.  In  this  connection  this  defendant 
says  that  while  it  is  the  only  pipe  line  now  extending  into  said  field,  other 
pipe  lines  could,  if  they  found  it  profitable  to  do  so,  at  a  reasonable  cost  not 
to  exceed  that  incurred  by  this  defendant,  construct  and  extend  their  lines 
from  nearby  connections  into  the  Healdton  Field  and  compete  with  this  de- 
fendant, and  thus  afford  another  outlet  to  the  markets  of  the  world,  or  the 
producers  themselves  could  at  reasonable  cost  build  a  pipe  line  to  connect 
with  the  railroads  and  other  pipe  lines  near  by,  and  thus  obtain  another  outlet 


•  SBC  8235  PuUic  business  de/lned.— Whenever  any  business,  by  reason  of  its  nature, 
extent  "or  the  existence  of  a  virtual  monopoly  therein,  is  such  that  the  public  must  use 
the  same  or  its  services,  or  the  consideration  by  it  given  or  taken  or  offered,  or  the  com- 
modities bought  or  sold  therein  are  offered  or  taken  by  purchase  or  sale  in  such  a 
manner  as  to  make  It  of  public  consequence  or  to  affect  the  community  at  large  as  to 
supply  demand  or  price  or  rate  thereof,  or  said  business  Is  conducted  in  violation  of  the 
first  section  of  this  article,  said  business  is  a  public  business,  and  subject  to  be  con- 
trolled by  the  State,  by  the  corporation  commission  or  by  an  action  in  any  district  court 
of  the  State,  as  to  all  of  Its  practices,  prices,  rates  and  charges.  And  It  is  hereby  de- 
clared to  be  the  duty  of  any  person,  firm  or  corporation  engaged  in  any  public  business  to 
render  its  services  and  offer  Its  commodities,  or  either,  upon  reasonable  terms  without 
discrimination  and  adequately  to  the  needs  of  the  public,  considering  the  faciUUes  of  said 
business.     (Revised  Laws  of  Okla.,  1910,  Vol.  II,  p.  2232.) 


12 


CONDITIONS  IN   THE  HEALDTON   OIL  FIELD. 


to  the  markets  of  the  world  for  said  oil.  In  this  connection  this  defendant 
shows  that  its  pipe  line  connects  said  field  with  the  Rock  Island  Railroad,  and 
that  by  constructing  only  some  eight  or  ten  miles  of  pipe  line,  said  field  could 
be  connected  with  the  railroad  of  Okla.  N.  Mex.  &  Pacific  (Company,  which 
connects  with  the  rail  line  of  the  Atchison,  Topeka  &  Santa  Fe  Railway  at 
Ardmore;  that  both  the  Rock  Island  Railroad  and  the  Santa  Fe  connect  with 
the  markets  of  the  world,  and  through  them  and  the  pipe  lines  connecting  said 
field  with  said  rail  lines  the  producers  could  dispose  of  their  product  to  pur- 
chasers in  competition  with  this  defendant  This  defendant  shows  that  while 
its  pipe  line  connects  said  field  with  the  Rock  Island  Railroad,  none  of  the 
producers  have  seen  fit  to  tender  any  oil  to  this  defendant  for  transportation  to 
the  Rock  Island  Railroad  or  to  make  any  demand  on  this  defendant  for  such 
transportation.  This  defendant  will,  at  reasonable  cost,  perform  such  trans- 
portation services  and  put  in  the  facilities  appropriate  thereunto  if  the  pro- 
ducers give  reasonable  notice  of  such  demand  and  provide  necessary  tankage 
or  other  facilities  to  receive  the  oil  at  destination. 

It  will  be  noted  that  the  Magnolia  Pipe  Line  Co.  based  its  denial 
of  being  a  virtual  monopoly  on  the  following  grounds: 

1.  Other  pipe  lines  could,  if  they  so  desired,  extend  their  lines  into 
the  Healdton  field,  or  the  producers  themselves  could  build  a  pipe 
line  to  connect  with  the  railroads  and  other  near-by  pipe  lines, 
thereby  furnishing  additional  outlets. 

2.  That  the  Magnolia  Pipe  Line  Co.  itself  connects  the  Healdton 
field  with  the  Rock  Island  Railroad  and  is  ready  to  transport,  as  a 
common  carrier,  to  its  point  of  connection  with  the  railroad,  any 
oil  which  may  be  tendered  it  for  transportation  by  the  producers, 
subject  to  "reasonable  cost,"  "reasonable  notice  of  such  demand," 
and  the  provision  by  the  shipper  of  "necessary  tankage  or  other 
facilities  to  receive  the  oil  at  destination." 

The  facts  in  regard  to  the  available  outlets  for  the  oil  from  the 
Healdton  field,  through  pipe  lines  connecting  it  with  the  outside 
markets  or  through  pipe  lines  and  railroad  transportation  com- 
bined, must  be  taken  into  consideration.  The  Magnolia  Pipe  Line 
Co.  was  up  to  November,  1914,  the  only  through  pipe-line  outlet  by 
which  the  Healdton  oil  could  be  taken  from  the  field  to  the  outside 
markets. 

The  expense  of  railroad  transportation  is  practically  prohibitive, 
even  were  there  reasonable  pipe-line  charges  imposed  for  carrymg 
the  oil  from  the  field  to  the  railroad.  The  quantity  that  can  be  profit- 
ably consumed  locally,  or  by  refineries  so  situated  that  they  can  pay 
the  expense  of  pipe-line  and  rail  transportation,  is,  and  has  been,  so 
small  as  to  be  negligible  in  the  consideration  of  this  subject. 

It  was  within  the  power  of  other  through  pipe  lines  to  enter  the 
field,  or  for  producers  to  build  pipe  lines  to  connect  with  them.  As 
a  matter  of  fact,  however,  the  amount  of  capital  involved  in  such  an 
undertaking  was,  up  to  November,  1914,  beyond  the  means  of  the  pro- 


.  4 


V^*. 


\) 


BEDUCTION  IN   CRUDE  OIL  PRICE. 


13 


ducers,  even  had  they  been  able  to  organize  for  the  undertaking. 
Furthermore,  the  prospects  of  the  field  have  not  yet  been  sufficient  to 
induce  the  Texas  Co.,  the  nearest  of  the  other  through  pipe  lines,  to 
build  a  branch  connecting  the  field  with  either  of  its  through  pipe 
lines  between  Port  Arthur,  Tex.,  and  the  Electra  (Tex.)  field  or  the 
Cushing  (Okla.)  field,  although  the  Producers'  Oil  Co.,  a  producing 
company  owned  and  controlled  by  the  same  interests  as  the  Texas  Co., 
own  and  operate  considerable  producing  property  in' the  Healdton 
field.  Under  the  conditions  which  have  actually  prevailed  since  the 
discovery  of  the  field  and  up  to  November,  1914,  the  Magnolia  Pipe 
Line  Co.  has  unquestionably  had  a  virtual  monopoly  of  the  only 
practicable  means  of  transportation  for  the  output  of  the  field. 

Alleged  intent  to  depress  land  values. — The  question  of  whether 
or  not  the  pipe  line  company  made  use  of  its  monopolistic  power  to 
depress  the  values  of  oil-producing  property  and  unproven  terri- 
tory, with  a  view  to  buying  it  cheap  through  the  medium  of  allied 
producing  companies,  must  be  examined  in  the  light  of  definite  ac- 
tions on  the  part  of  the  Magnolia  interests. 

The  Magnolia  Pipe  Line  Co.  did  not  produce  any  oil  itself;  it 
merely  bought  the  oil  produced  by  others  and  transported  and  sold 
the  same.  One  of  the  producing  companies,  however,  is  closely  con- 
nected with  the  Magnolia  interests  (see  p.  1),  namely,  the  Corsicana 
Petroleum  Co.  This  company  owns  producing  wells  and  also  other 
property  in  the  Healdton  field.  Soon  after  the  bringing  in  of  the  dis- 
covery well,  a  representative  of  this  company  tried  to  buy  the  property 
on  which  the  well  was  located.  Failing  in  this,  he  tried  to  buy  a 
part  interest,  but  in  this  also  he  was  unsuccessful.  Later,  the  Cor- 
sicana Petroleum  Co.  was  able  to  secure  land  or  leases  elsewhere  in 
the  field.  The  records  of  the  company  show  that  all  of  the  holdings 
of  the  Corsicana  Petroleum  Co.  in  the  Healdton  field  are  by  oil 
and  gas  leases,  none  of  which  were  producing  or  operated  at  the  date 
of  acquisition  by  the  Corsicana  Petroleum  Co.  The  following  table 
shows  a  number  of  details  concerning  these  leases: 


ii 

jl 


14 


CONDITIONS  IN   THE  HEALDTON   OIL  FIELD. 


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BEDUCTION  IN    CKUDE   OIL  PBiCB. 


15 


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16 


CONDITIONS  IN   THE   HEALDTON   OIL   FIELD. 


REDUCTION  IN   CRUDE   OIL  PRICE. 


17 


It  should  be  noted  that  the  Corsicana  Petroleum  Co.  has  not  ex- 
tended its  holdings  since  December  11,  1913.  This  was  about  three 
months  before  the  reduction  in  the  price  of  oil  took  place. 

In  refutation  of  the  charges  that  the  Corsicana  Petroleum  Co.  had 
sought  to  take  advantage  of  the  field  conditions  and  cuts  in  the  price 
of  oil  since  March  2  to  increase  its  holdings,  George  C.  Greer,  gen- 
eral attorney  for  the  Magnolia  interests,  in  interviews  with  repre- 
sentatives of  the  Bureau  of  Corporations,  and  also  in  various  letters, 
described  the  position  of  the  Corsicana  Petroleum  Co.  in  this  matter. 
He  stated  that  it  had  been  its  policy  to  abstain  from  increasing  its 
holdings  for  two  reasons — first,  because  its  actions  in  that  respect 
would  be  the  subject  of  misunderstanding  and  criticism,  and  second, 
because  it  was  impracticable,  owing  to  unsettled  financial  conditions. 

Mr.  Greer  furthermore  stated  that  a  number  of  attempts  had  been 
made  by  owners  of  producing  property  in  the  Healdton  field,  and 
by  others  who  claimed  to  act  for  them,  to  induce  the  Corsicana 
Petroleum  Co.  to  increase  its  holdings  by  either  buying  their  prop- 
erty— stock  control  in  their  companies — or  going  in  with  them,  either 
secretly  or  openly,  and  buying  up  such  properties  as  might  be  pur- 
chased on  favorable  terms.  He  described  four  such  instances  in 
detail,  specifying  names,  dates,  and  other  particulars  of  the  pro- 
posals that  were  made. 

Inasmuch  as  it  has  been  ascertained  by  the  Bureau  that  the  Corsi- 
cana Petroleum  Co.  has  not  increased  its  holdings  in  the  Healdton 
field  since  the  first  cut  in  price  took  place,  it  is  not  necessary  to  go 
into  this  question,  nor  to  consider  further  the  validity  of  this  charge 
made  by  the  producers. 

Alleged  intent  to  depress  crude-oil  values. — The  next  question  is 
how  far  the  pipe  line  company  made  use  of  its  monopolistic  power 
to  depress  the  market  price  for  oil,  with  a  view  to  acquiring  at  a 
low  price  the  large  stocks  of  oil  already  above  ground,  or  available 
from  the  wells  then  existing  in  the  field.  In  the  determination  of 
this  question  the  factor  of  intent,  in  the  absence  of  an  admission, 
and,  indeed,  in  the  face  of  a  direct  denial  on  the  part  of  the  company 
that  such  was  its  object,  must  be  studied  through  the  examination 
of  the  surrounding  circumstances.  Briefly  stated,  the  facts  r.pon 
which  this  contention  was  based  were — that  the  producers  had  been 
urged  by  representatives  of  the  Magnolia  interests  to  develop  the 
field,  under  promise  that  all  their  production  would  be  bought,  and 
that  ample  facilities  for  taking  care  of  the  output  would  be  pro- 
vided; that  after  they  had  gone  ahead  in  good  faith  and  brought  a 
large  quantity  of  oil  to  the  surface  and  developed  the  existence  of  a 
large  potential  production,  the  Magnolia  Pipe  Line  Co.  cut  the 
market  price  of  the  oil,  refused  to  buy  and  store  the  oil  already  above 
ground,  in  excess  of  the  company's  existing  tankage  capacity,  and 


•  •- 


cut  down  its  daily  purchases  and  runs  from  the  field  far  below  the 
existing  output  of  the  field,  and  the  actual  carrying  capacity  of  its 
pipe  line.  The  contention  of  the  producers  was  that  after  having, 
through  the  early  promises,  stimulated  the  development  of  a  large 
output,  the  action  taken  by  the  Magnolia  Pipe  Line  Co.  was  unjusti- 
fiable, and  was  taken  in  order  to  depress,  arbitrarily,  the  price  of 
Healdton  oil  at  a  time  when  it  was  practically  the  sole  purchaser  in 
the  field. 

That  various  assurances  were  given  to  producers  in  the  early 
days  of  the  development  of  the  field,  on  the  part  of  representatives 
of  the  Magnolia  interests,  that  all  the  production  would  be  needed 
by  the  Magnolia  refineries,  and  that  some  of  the  early  producers 
were  urged  to  develop  their  property,  and  tanks  were  loaned  them 
in  which  to  store  their  oil  until  the  Magnolia  interests  could  run  it 
into  the  storage  facilities  to  be  erected  in  connection  with  their  pipe 
line,  are  facts  amply  established  by  the  evidence.  That  the  company 
first  made  a  discrimination  between  oil  under  32°  Baume  and  oil  over 
that  standard,"  and  reduced  its  purchasing  price  for  the  former  from 
$1.05  to  $0.70  a  barrel,  and  later  put  all  oil  from  the  Healdton  field, 
regardless  of  gravity  tests,  on  the  same  basis,  at  a  purchase  price  of 
$0.70,  are  facts  also  established  by  the  evidence  and  not  disputed. 
The  evidence  also  shows  that  there  was  a  reduction  of  daily  runs  and 
a  refusal  to  build  storage  tankage  in  the  Healdton  field  to  take  care 
of  the  surplus. 

Claims  of  the  pipe  line  company. — The  Magnolia  Pipe  Line  Co. 
asserts  that  its  ea^rly  promises  were  based  on  a  mistake,  on  the  part 
of  its  representatives,  regarding  the  actual  refining  value  of  the 
Healdton  crude,  and  that  its  later  actions  in  regard  to  prices  and 
runs  were  forced  upon  it  through  economic  causes,  and  were  not 
arbitrary  nor  unjustifiable  under  the  circumstances.  Briefly  stated, 
the  claim  of  the  Magnolia  Pipe  Line  Co.  is  that  its  representatives 
made  a  mistake  in  their  early  estimates  of  the  refining  qualities  of 
Healdton  crude,  and  that  as  soon  as  their  more  complete  analyses 
and  tests  had  demonstrated  the  fact  that  because  of  its  heavy  char- 
acter and  its  sulphur  content  the  Healdton  oil  was  chiefly  valuable 
for  fuel  use,  rather  than  for  refining,  it  became  necessary  to  buy  it 
at  a  price  corresponding  to  that  of  the  fuel-oil  crudes  of  the  other 
fields — the  heavy  Caddo,  the  south  Louisiana  and  Texas,  and  the 
Mexican  crudes,  with  the  products  of  which  it  entered  into  compe- 
tition in  the  Texas  markets. 

Furthermore,  because  of  the  quality  of  the  oil  and  the  need  of 
keeping  it  separate  from  the  other  crudes,  such  as  Electra  and  Corsi- 
cana, it  was  unduly  expensive  to  take  off  the  lighter  products  by 

•  In  regard  to  the  notice  of  Jan.  26,  see  note  on  p.  lo. 
76568°— 15 2 


18 


CONDITIONS  IN   THE  HEALDTON   OIL  FIELD. 


REDUCTION  IN  CRUDE  OIL  PRICE. 


19 


"topping"  at  the  Magnolia  Petroleum  Co.'s  existing  refineries  at 
Corsicana  and  Beaumont.  It  was  desirable,  instead,  to  build  a  large 
refinery  at  Fort  Worth,  Tex.,  especially  equipped  to  handle  the 
Healdton  crude,  to  build  a  special  pipe  line  from  Alvord,  Tex.,  to 
the  Fort  Worth  refinery  to  carry  the  oil  there,  and  to  provide  enough 
tankage  at  Fort  Worth  to  store  the  crude  oil  until  it  could  be 
"topped."  The  Magnolia  Pipe  Line  Co.  decided  to  cut  down  its 
runs  from  the  Healdton  field  until  such  time  as  sufficient  pipe  line, 
storage,  and  refining  facilities  could  be  provided  to  handle  larger 
quantities. 

The  position  of  the  Magnolia  interests  in  regard  to  the  early  assur- 
ances given  to  producers  respecting  the  quality  of  the  oil  and  their 
desire  and  intention  to  take  all  that  could  be  produced  is  that  a  seri- 
ous mistake  was  made  by  its  representatives,  but  that  it  was  a  mistake 
honestly  made.  The  affidavits  of  D.  C.  Stewart,  F.  V.  Faulkner,  and 
E.  R.  Brown  (Exhibits  3,  4,  and  5,  pp.  98-102)  describe  the  circum- 
stances under  which  the  mistake  was  made.  It  was  admitted  to  this 
Bureau  by  a  representative  of  the  Magnolia  interests  that  a  lack  of 
ordinary  business  precaution  was  shown  by  them  in  relying  on  field 
judgments  as  to  the  quality  of  the  oil,  and  not  first  having  careful 
and  thorough  analyses  and  tests  made  on  substantial  quantities  of  the 
oil  before  embarking  on  an  undertaking  of  such  importance.^  A  simi- 
lar serious  lack  of  business  precaution  was  shown  in  not  making  the 
analyses  and  tests  on  which  the  first  reduction  of  price  was  based 
(that  of  March  2,  establishing  a  diflPerence  in  price  according  to  the 
gravity  of  the  crude)  complete  enough  to  reveal  the  presence  in  the 
crude  oil  of  sulphur  of  such  a  nature  as  to  require  an  expensive 
method  of  removal. 

It  has  been  asserted  by  a  representative  of  the  Magnolia  interests 
that  because  of  these  mistakes  they  also  have  suffered.  They  entered 
the  Healdton  field  with  their  pipe  line  to  obtain  crude  oil  suitable 
for  refining  in  their  Beaumont  refinery,  to  supplement  the  limited 
quantity  of  oil  which  they  were  able  to  obtain  from  the  Electra  field. 
They  desired  to  secure  an  additional  10,000  barrels  a  day,  and  had 
planned  a  line  to  the  Gushing  (Okla.)  field  to  secure  this  supply. 

•  In  connection  with  this  subject  it  may  be  pointed  out  that  in  the  Oil  and  Gas  Journal 
In  descriptions  of  the  newly  discovered  Healdton  field  the  following  statements  occurred. 
Issue  of  Aug.  28,  1913,  p.  12,  col.  2:  "The  oil  produced  from  the  well  Is  reported  to  be 
38°  gravity,  while  that  produced  in  the  Wheeler  field  is  of  22°  gravity."  Issue  of  Sept.  4 
p.  22,  col.  4  :  "A  tost  of  the  oil  from  this  [the  discovery]  well  shows  30°  gravity."  Issue 
of  Sept.  18,  p.  12,  col.  4  :  "  The  well  showed  32 J  °  gravity  oil  which  Is  by  far  the  best  grade 
ever  found  In  the  Carter  County  field."  And  In  the  Issue  of  Dec.  11,  p.  14,  col.  3,  In  a 
description  of  the  Wheeler  field.  It  Is  stated :  "  The  oil  in  the  Oil  City  development  is 
19°  gravity,  while  the  oil  found  In  the  Healdton  pool  tests  32°."  According  to  the 
aflSdavits  submitted  (which  are  confirmed  by  the  private  correspondence  of  the  company 
officials  between  themselves),  the  pipe  line  company  did  not  have  reliable  Information  In 
regard  to  the  actual  quality  and  character  of  Healdton  crude  until  February  26,  1914. 


»*- 


i 


^ 


i 


) 


When  the  Healdton  field  was  discovered  and  the  oil  was  pronounced 
to  be  a  high-grade  refining  crude,  by  their  representatives,  it  was 
estimated  by  them  that  the  field  might  eventually  be  developed  to  a 
production  of  10,000  barrels  a  day.  The  estimate  of  the  future  pro- 
duction of  the  field  at  that  time— only  one  well  having  then  been 
brought  in — was  merely  a  matter  of  judgment  on  the  part  of  men 
experienced  in  oil-field  conditions.  When  the  low-grade  refining 
qualities  of  the  Healdton  crude  were  established,  the  company  not 
only  had  bought  a  considerable  quantity  of  the  Healdton  crude  at 
the  price  of  high-grade  refining  oil,  but  it  had  to  provide,  at  a  heavy 
expense,  special  facilities  to  care  for  the  future  oil  from  the  field.  To 
supply  the  place  of  the  10,000  barrels  daily  of  refinable  crude  that  it 
had  expected  to  get  through  its  pipe  line  from  Healdton,  it  was  forced 
to  buy  crude  from  other  fields,  and  have  it  transported  by  rail  to 
Beaumont,  Tex.,  in  order  to  run  its  refinery  there  at  its  most  profit- 
able capacity. 

On  September  24  the  Magnolia  Pipe  Line  Co.  notified  the  pro- 
ducers that  on  and  after  September  30  it  would  pay  40  cents  per 
barrel.  Because  of  action  taken  by  the  Corporation  Commission,  this 
reduction  in  price  was  not  put  into  effect.  The  pipe  line  company,  in 
justification  of  its  attempt  to  reduce  the  price,  abandoned  its  conten- 
tion that  the  price  of  Healdton  crude  should  be  made  to  correspond 
with  the  price  of  the  fuel-oil  crudes,  for  not  only  had  there  been  no 
contemporaneous  fall  in  the  prices  of  such  crudes,  but  in  some  of  the 
fields  producing  them  prices  had  actually  advanced.  This  rise  was 
generally  attributed  in  the  trade  papers  to  a  heavy  export  fuel-oil  de- 
mand, which  could  conveniently  be  supplied  from  such  crudes.  The 
pipe  line  company  based  its  justification  on  the  ground  that,  follow- 
ing the  fall  in  the  price  of  Cushing  crude  to  55  cents,  it  was  much 
more  profitable  to  buy  this  high-grade  oil,  transport  it  in  tank  cars 
to  their  refineries,  and  refine  it  in  place  of  the  Healdton  crude.  They 
also  pointed  out  that  the  fuel  oil  from  Cushing  crude  was  competing 
with  that  from  Healdton.  They  claimed  that  notwithstanding  the 
export  demand,  fuel-oil  prices  were  low  in  north  Texas,  the  terri- 
tory in  which  Healdton  fuel  oil  could  profitably  be  marketed. 

The  validity  of  the  explanations  offered  by  the  Magnolia  interests 
for  the  cuts  in  prices  and  runs  of  Healdton  oil  depends  upon  the 
determination  of  the  actual  refining  quality  of  Healdton  oil.  If, 
according  to  the  contention  of  the  Magnolia  interests,  it  is  chiefly 
valuable  as  a  fuel-oil  crude,  or  is  less  valuable  for  refining  purposes 
than  other  crudes  available  to  their  refineries,  then  they  have  sound, 
economic  grounds  for  placing  its  price  on  a  basis  which  will  allow 
it  to  meet  other  competitive  crudes.  If,  on  the  other  hand,  it  is 
valuable  as  a  high-grade  refining  crude,  much  injustice  has  been 
done  to  the  producers. 


20 


CONDITIONS  IN   THE  HBALDTON   OIL  FIELD. 


Section  2.  The  specific  gravity  of  Healdton  crnde  oil. 

It  is  a  well-established  fact  that  crude  oils  which  are  light  or  of 
low  specific  gravities  are  capable  of  yielding  a  larger  proportion  of 
gasoline  and  naphtha  than  those  which  are  heavy  or  of  high  specific 
gravities.  The  crude  oil  coming  from  different  wells  in  the  same 
field  will  vary  somewhat  in  respect  to  specific  gravity.  Tests  to 
determine  the  specific  gravity  are  made  with  the  use  of  a  hydrometer, 
the  result  being  usually  stated  according  to  the  empirical  Baume 
scale  at  60°  F.  temperature.  The  result  expressed  in  terms  of  the 
Baume  scale  differs  from  that  shown  for  specific  gravity,  which  is 
the  statement  of  the  ratio  of  the  weight  of  a  given  volume  of  oil  to 
that  of  the  same  volume  of  water.  According  to  the  Baume  scale, 
the  higher  degrees  represent  the  lighter  gravities  and  the  lower  de- 
grees the  heavier  gravities.  The  true  specific  gravities  vary,  broadly 
speaking,  inversely  with  the  degrees  shown  by  the  Baume  scale. 
Given  the  gravity  in  degrees  Baume,  the  true  specific  gravity  can  be 
readily  ascertained  by  the  use  of  empirical  tables. 

The  highest  Baume  test  shown  for  any  well  in  the  Healdton  field 
for  which  the  Bureau  of  Corporations  has  been  able  to  secure  reli- 
able information  was  33.93°  Baume.  This  sample  was  taken  on  April 
1,  1914,  from  a  well  on  the  Bonner  lease  in  sec.  4,  T.4S.,  R.3W.  The 
lowest  Baume  test  was  29.27°.  This  sample  was  taken  on  April  2, 
3914,  from  the  McClure  lease  on  sec.  5,  T.4S.,  R.3W.  Both  of  these 
samples  were  taken  by  representatives  of  the  United  States  Bureau 
of  Mines.  All  of  the  oil  from  the  field  is  run  either  into  the  pipe 
line  company's  storage  tanks  or  through  the  pipe  line,  without  any 
effort  being  made  to  keep  the  oil  from  different  wells  separate.  The 
Baume  test  of  the  oil  as  it  leaves  the  field  for  Texas  averages  31.6°. 
The  Bureau  of  Mines'  average  of  20  samples  fresh  from  the  wells 
in  different  parts  of  the  field  was  31.57°  B.  The  average  gravity  of 
886,254  barrels  run  by  the  Magnolia  Petroleum  Co.  at  its  Corsicana 
refinery  during  the  six  months  ending  September  30,  1914,  was 
31.36°  B.  The  importance  of  these  differences  in  the  gravity  of  oil 
coming  from  different  wells  in  the  Healdton  field  was  emphasized 
when  the  Magnolia  Pipe  Line  Co.,  between  March  9  and  March  26, 
paid  35  cents  per  barrel  less  for  oil  testing  under  32°  B.  than  for  oil 
32°  B.  and  over.  According  to  the  judgment  of  the  pipe  line  com- 
pany's officers  at  that  time,  the  oil  testing  32°  B.  and  over  was  classed 
as  having  valuable  refining  qualities,  while  that  under  32°  B.  was 
classed  as  a  fuel-oil  crude.  This  was  because  of  the  greater  propor- 
tion of  the  valuable  naphtha  and  illuminating  oils  obtainable  from 
the  crude  which  tested  32°  B.  and  over.  Whether  the  oil  is  a  trifle 
above  or  a  trifle  below  32°  B.  has  no  particular  importance,  but  this 
has  often  been  made  the  dividing  line  in  distinguishing  heavy  from 
light  crudes  in  the  Mid-Continent  field. 


•«- 


i 


REDUCTION  IN   CRUDE   OIL  PRICE. 


21 


Section  3.  Products  obtainable  from  Healdton  crude  oil. 

There  is  at  the  present  time  no  standard  method  in  general  accep- 
tance for  absolutely  and  definitely  establishing  the  refining  quality 
of  any  given  petroleum  crude  oil.  It  is  possible,  by  variations  in 
the  refining  methods  used,  to  obtain  a  wide  range  from  the  same 
crude  oil,  not  only  in  the  kinds  of  refined  products  but  also  in  the 
proportions  in  which  such  products  are  obtained.  The  commercial 
value  of  a  crude  oil  depends  not  only  on  its  quality — that  is,  its 
chemical  constituents— but  also  on  the  cost  of  securing  refined  prod- 
ucts from  it  and  the  market  prices  of  such  products. 

Three  general  kinds  of  tests  to  establish  definitely  the  character 
of  the  refined  products,  and  the  proportions  in  which  they  can  be 
obtained,  are  in  practical  use— the  laboratory  distilling  flask  methods, 
the  barrel  still  tests,  and  test  runs  made  in  actual  refinery  operations. 
In  all  three  forms  there  are  many  modifications  of  method  practiced. 
While  in  the  estimation  of  oil  men  generally  the  actual  results  from 
runs  made  on  a  large  scale  under  commercial  conditions,  by  well- 
equipped  refineries,  afford  the  best  tests  of  the  value  of  a  particular 
crude,  yet  from  a  scientific  standpoint  such  returns  are  not  conclu- 
sive as  to  the  constituent  elements  and  quality  of  the  oil,  because  the 
market  reached  by  the  refinery  may  not  furnish  a  sufficient  demand 
for  the  particular  refined  products  which,  from  its  chemical  constitu- 
ents, the  crude  is  best  fitted  to  produce.  Nevertheless,  for  the  crudes 
of  a  particular  region  for  which  the  market  conditions  are  the  same, 
the  test  of  actual  returns  from  a  refinery  run,  if  reliably  made  to 
develop  the  highest  percentage  of  valuable  products,  should  and  does 
carry  the  most  weight  in  the  determination  of  its  commercial  value. 

Crudes  are  chiefly  valuable  at  the  present  time  in  proportion  to 
their  ability  to  furnish,  without  undue  refinery  investment  and  op- 
erative cost,  either  the  lighter  products,  such  as  gasoline  and  naph- 
tha, or  high-grade  lubricants  from  the  residuum  or  heavier  "  end  " 
of  the  oil.  Formerly  the  ability  to  furnish  illuminating  oils  was 
more  highly  valued  than  that  to  furnish  gasoline,  a  product  which, 
for  many  years,  was  either  regarded  as  waste  or  had  a  very  limited 
market.  The  development  and  extensive  use  of  gasoline  engines  has 
frequently  made  it  profitable  in  more  recent  years  to  increase  the 
output  of  gasoline,  even  at  the  expense  of  reducing  the  output  of 
illuminating  oil.  The  least  valuable  crudes  are  those  which  are  fit 
only  for  fuel  purposes.  While  it  is  theoretically  possible  to  secure, 
to  a  limited  extent,  most  of  the  chief  refined  products,  from  all 
crudes,  in  practical  refinery  operations  the  expense  of  the  methods 
involved  or  the  absence  of  demand  for  certain  products  in  the 
markets  accessible  to  the  refineries  practically  prohibits  the  produc- 
tion of  some  of  them  from  certain  crudes. 


22 


CONDITIONS  IN   THE   HEALDTON   OIL  FIELD. 


The  Bureau  has  secured  from  a  number  of  sources  records  of  tests 
which  have  been  made  of  Healdton  crude  oil.  These  include  labora- 
tory distilling  flask  tests,  barrel  still  tests,  and  refinery  runs. 

The  differences  bei'Ween  tests  for  the  different  methods  of 
REFINING. — ^The  crude  oil  of  the  Kansas,  Oklahoma,  Louisiana,  and 
Texas  fields  is  refined  in  two  types  of  refineries— those  which  extract 
only  the  naphtha  or  gasoline,  illuminating  oils,  and,  in  some  cases, 
gas  oil,  and  sell  the  residuum  for  fuel  oil,  and  those  which,  in  addi- 
tion to  obtaining  some  of  the  above-mentioned  products,  also  extract 
lubricants  from  the  residuum.  The  first  type  of  refineries  are  com- 
monly known  as  "  skimming "  or  "  topping "  plants ;  the  second  as 
"lubricating"  plants.  Most  of  the  refineries  situated  west  of  the 
Mississippi  Kiver  do  not  produce  lubricants.  The  reasons  for  this 
are  found  in  their  comparatively  limited  markets  for  lubricating 
oils,  in  the  more  expensive  plant  and  higher  grade  of  skill  needed  to 
manufacture  lubricants,  and,  to  some  extent,  also  in  the  profitable 
local  markets  for  fuel  oil.  As  a  result,  comparatively  little  lubri- 
cating oil  is  refined  west  of  the  Mississippi  Kiver  from  the  crude  oil 
of  the  Mid-Continent,  Louisiana,  and  Texas  fields,  when  the  quantity 
of  the  crude  oil,  which  unquestionably  has  considerable  lubricant 
possibilities,  is  considered.  The  refiners  have  regarded  it  more  ex- 
pedient or  profitable  to  "  top  "  their  crude  and  sell  the  residuum  for 
fuel  oil.  When  market  conditions  warrant,  sometimes  part  of  the 
residuum  is  run  to  gas  oil,  at  other  times  all  of  it  goes  into  fuel  oil. 

The  various  tests  of  Healdton  crude  of  which  the  Bureau  b.as 
secured  the  records  have  been  made  with  two  different  objects  in 
view.  Some  were  made  to  show  what  products  could  be  obtained  if 
the  crude  were  refined  in  a  "topping"  plant — ^that  is,  for  gasoline, 
kerosene  and  fuel  oil — and  others  to  show  the  products  obtainable 
if  the  crude  were  refined  to  furnish  lubricants. 

Attention  should  be  called  to  the  fact  that  in  Tables  2,  3,  and  4 
there  is  no  agreement  in  the  use  of  the  terms  "  naphtha  "  and  "  gaso- 
line "  by  the  different  chemists  and  refiners.  The  terminology  used 
in  each  report  is  presented  in  the  tables.  Comparisons  of  the  differ- 
ent results  should  therefore  be  based  on  the  percentage  of  the  prod- 
ucts obtained  at  the  gravity  specified,  since  the  use  of  the  names  is 
misleading.  In  a  paper  on  "  The  Manufacture  of  Petroleum  Prod- 
ucts," given  in  the  Proceedings  of  the  Engineers'  Club  of  Philadel- 
phia, April,  1913,  F.  C.  Robinson,  chief  chemist  of  the  Atlantic 
Refining  Co.,  stated : 

The  first  group  of  products  from  petroleum  is  made  up  of  gasolines  and 
naphthas.  There  is  some  confusion  among  the  various  names,  benzine,  gasoline, 
naphtha,  etc.,  but  the  best  practice  is  to  use  the  word  gasoline  for  any  mixture 
of  light  hydrocarbons  intended  for  use  in  any  kind  of  vaporizer ;  that  is,  to  be 


BEDUCTION  IN   CRUDE  OIL  PRICE. 


23 


t 
^ 


gasified  in  a  gas  machine,  gasoline  torch,  gasoline  stove,  or  automobile  car- 
buretor. Also  to  confine  the  word  naphtha  to  mixtures  of  hydrocarbons  intended 
for  some  purpose  that  requires  a  very  good  odor,  such  as  the  naphtha  used  by 
cleaners,  varnish-makers,  soap-makers,  etc.  In  this  scheme,  the  word  benzine 
finds  no  place.  Gasolines  and  naphthas  vary  in  average  boiling  point  according 
to  the  use  for  which  they  are  intended,  but  all  lie  between  125  and  280°  F. 
In  all  cases  it  is  essential  that  they  be  free  from  all  heavy  hydrocarbons  that 
do  not  evaporate  from  the  hand. 

I.  C.  Allen,  in  a  statement  submitted  with  the  United  States  Bureau 
of  Mines'  analyses  to  the  Corporation  Commission  on  June  9,  1914, 
under  the  head  of  "  What  is  to  be  considered  gasoline,"  said :« 

The  ordinary  refiner  grades  gasoline  according  to  its  specific  gravity,  using 
the  Baum6  scale.  The  gravity  of  gasoline  varies  within  considerable  limits 
according  to  the  use  to  which  it  Is  put.  The  ordinary  grade  of  automobile  gaso- 
line found  on  the  market  approximates  62  degrees  Baum6. 

The  laboratory  distilling  flask  tests. — Of  the  different  analyses 
and  tests  of  Healdton  crude  oil,  the  first  to  be  considered  are  various 
analyses  made  in  laboratories  by  the  use  of  the  distilling  flask.  The 
Bureau  has  secured  from  different  sources  the  results  of  35  separate 
laboratory  analyses  of  samples  of  Healdton  crude.  Through  the 
courtesy  of  the  United  States  Bureau  of  Mines,  the  results  of  analyses 
made  for  it  on  2  samples  of  crude  oil,  by  4  different  methods,  by 
M.  C.  Whitaker,  a  consulting  industrial  and  engineering  chemist, 
were  obtained,  and  also  detailed  results  of  each  analysis  made  by  the 
Bureau  of  Mines'  chemists  on  20  samples  of  Healdton  oil. 

The  resultant  averages  of  these  20  tests,  as  compiled  by  the  Bureau 
of  Mines,  is  presented  in  the  following  table,  together  with  the  re- 
turns from  15  other  analyses.  In  the  4  tests  made  by  G.  Y.  Williams 
the  lubricating  possibilities  of  the  crude  were  not  determined;  in 
the  8  tests  made  by  M.  C.  Whitaker  the  naphtha  and  illuminating  oil 
were  first  removed  and  the  residue  was  separated  into  lubricating  oil 
and  coke;  in  3  tests,  the  two  tests  made  by  C.  K.  Francis  and  the 
Bureau  of  Mines'  average  based  on  20  tests,  the  heavier  contents 
were  classed  as  lubricating  oil  and  residue;  and  in  a  test  by  L. 
Kirschbraun  the  heavy  end  was  divided  into  lubricating  oil,  gas  oil, 
and  residue. 

It  should  be  noted  that  all  of  the  above-mentioned  products  were 
not  "  finished  "  to  meet  commercial  standards.  The  loss  in  "  finish- 
ing" the  naphtha,  gasoline,  and  kerosene  would  probably  be  small, 
and  that  in  finishing  certain  lubricants  relatively  large.  For  gas  oil 
and  residuum,  there  would  be  no  loss  in  percentage,  but  probably 
some  gain,  as  the  residues  from  the  finishing  processes  of  the  lighter 
oils  and  the  lubricants  could  be  turned  into  the  gas  and  fuel  oil. 

The  following  table  shows  the  results  of  the  various  laboratory 
distilling  flask  tests: 

•  Transcript  of  Corporation  Commission  hearing.  State  Exhibit,  Allen  No.  1. 


24 


CONDITIONS  IN   THE   HEALDTON   OIL  FIELD. 


Table  2.-LAB0RAT0RY  DISTILLING  FLASK  ANALYSES  MADE  TO  DETERMINE  THE 
REFINING  QUALITIES  OF  HEALDTON  CRUDE  OIL.* 


Test  made  by— 


Q.  Y.  WUliams: 

No.l 

No.2 

No.3 


No.  4. 


C.  K.  Francis: 

No.l 

No.2 


Where  test  was 
made. 


Norman,  Okla . . 
do 


Oklahoma 

Okla. 
do 


City, 


Date. 


1914, 
Apr.  12 
..do.... 


May     1 

..do.... 


L.  Kirschbraun. 


M.  C.  Whitaker: 
Sample  1470 — 

No.  Id 

No.2e 

No.3/.... 
Ho.Aff 

Sample  1464— 

No.  Id 

No.2« 

No.3/.... 
No.  4a 


U.  8.  Bureau  of  Mines' 
average  of  20  tests . 


Stillwater,  Okla. 
do 


Chicago,  111. 


New  York,  N.Y. 

do 

do 

do 


.do. 
.do. 
.do. 
.do. 


Pitts:  urgh.  Pa. 


Mar.  23 
-.do.... 


Apr.  18 


June 
...do. 


Quantity 
tested. 


Gravity 
of  crude 
oU. 


C.c.h 

100 
100 
100 

500 


300-500 
300-500 


.do. 


.do. 


.do. 


-do. 
.do. 
.do. 


100 
100 
100 
100 

100 
100 
100 
100 


Deff.B. 
31.80 
31.80 


33.70 
30  40 


31.80 


30.30 
30.30 
30.30 
30.30 

32.75 
32.75 
32.75 
32.75 


3L57 


Sulphur 
content 
of  crude 
oil  by 
weight. 


Per  cent. 

0.66 

.55 

.72 

.73 


Paraffin 

con- 
tent by 
weight. 


Per  cent. 

0.67 

.67 


.70 


(») 


Asphalt 

con- 
tent by 
weight. 


Per  cent. 
0.71 
.70 


(') 


•  All  results  are  based  on  the  percentages  by  volume. 

*  100 0.  c.  equals  3.38  fluid  ounces. 

e  Presence  of  asphalt  stated  in  testimony,  but  amount  not  given. 
i  Engler  method. 
«  Ubbelohde  method. 
/  Regnault  method. 
9  Nawratil  method. 

h  From  the  lubricating  distillates  from  8.5  to  1.5  per  cent  of  paraffin  wax  can  be  obtained.    (Testimony 
of  L  C.  .\Uen  at  Corporation  Commission  hearing  of  June  9, 1914.) 


A 


BEDUCTION   IN   CRUDE   OIL   PRICE. 


25 


TABLE  2.-LABORATORY  DISTILLING    FLASK  ANALYSES  MADE  TO  DETERMINE  THE 
REFINING  QUALITIES  OF  HEALDTON  CRUDE  OILr-Continued. 


Product. 

Test  made  by— 

Naphtha. 

Gasoline. 

Kerosene. 

Total 
naphtha, 

Gravity. 

Per  cent. 

Gravity. 

Per  cent. 

Gravity. 

Per  cent. 

gasoline, 

and 
kerosene. 

G.  Y.  Williams: 

Kn  1                      

Deff.  B. 

Deg.  B. 
62.4 
62.4 
62.4 
62.4 

12.0 

n.7 

12.9 
11.6 

Deg.  B. 
42.0 
42.0 
42.0 
42.0 

35.0 
34.6 
34.0 
34.5 

Percera. 
47.0 

No  2        

46.3 

No  3            

46.9 

No.4 



46.1 

C.  K.  Francis: 

No  1           

61.6 
54.6 

14.5 
10.3 

a4L9 
039.1 

40.8 
32.0 

55.3 

No.2 

42.3 

1m  ITfar^^^hhrftiiQ       ....«.•••••.. 

64.9 

15.0 

42.2 

25.0 

4ao 

M.  C.  Whitaker: 
Sample  1470— 

tin   16                        .   .      .. 

57.5 
c7.0 
57.7 
55.3 

60.2 
62.7 
62.1 
59.9 

9.3 
5.2 
3.7 
2.8 

16.7 

11.5 

9.5 

11.1 

41.4 
43.6 
43.7 
44.2 

40.5 
43.3 
43.3 
43.2 

32.7 
32.3 
34.8 
34.0 

28.3 
30.8 
31.2 
30.2 

42.0 

Kn  9e 

37.  S 

Kn  ^d 

38.5 

Mn   i« 

36.8 

Samp     1464— 

"Kn    \h 

45.0 

Vn   1e 

42.S 

Kn   'id                        .       . 

4a7 

Nn  4« 

4LS 

U.  S.  Bureau  of  Mines'  average 

i\f  9(0  tAfitj«                        ..... 

57.7 

7.0 

42.2 

30.7 

37.7 

#  Weighted  average.  Original  table  shows  kerosene  fraction,  44.8  gravity,  27.5  per  cent;  Ulumlnating 
oils,  36.0  gravity,  13.3  per  cent  for  test  No.  1.  Kerosene  fraction,  40.0  gravity,  25.0  per  cent;  iUuminating 
oils,  36.1  gravity,  7.0  per  cent  for  test  No.  2. 

t  Engler  method. 

e  Ubbelohde  method. 

dR^piault  method. 

•Nawratil  method. 


t 


26 


CONDITIONS  IN   THE   HEALDTON   OIL   FIELD. 


Table  2.— LABORATORY  DISTILLING  FLASK  ANALYSES  MADE  TO  DETERMINE  THE 
REFINING  QUALITIES  OF  HEALDTON  CRUDE  OIL— Continued. 


Product— Contin  ued. 

Test  made  by— 

Gas  oil. 

Lubricating  oils. 

Residuum. 

Coke. 

Loss. 

Grav 
it.v. 

Per 
cent. 

Grav- 
ity. 

Per 
cent. 

Grav- 
ity. 

Per 
cent. 

Total. 

G.  Y.  W  lliams: 

No  1                 

Deg.  B. 

Deg.  B. 

Deg.  B. 
32.5 
32.5 
32.5 
20.4 

48.0 
48.2 
47.0 
53.9 

Pr.  ct. 
5.0 
5.5 
6.1 

Pr.  et. 

(«) 
(«) 
(«) 
(») 

Pr.  rt. 
100 

No  2 

100 

No.3 

...•.•.. 

100 

No  4          

100 

C.  K.  Francis: 

No.  1 

35.0 
34.2 

7.0 
16.0 

20.2 
20.6 

37.2 
41.7 

' 

0.5 
.0 

100 

No.2 

100 

L  Kirschbraun 

32.7 

15.0 

26.4 

12.5 

15.2 

32.5 

(*) 

100 

M.  C.  Whitaker: 
Sample  1470— 

No.  ic 

• 

28.0 
29.1 
29.8' 
29.1 

27.7 
28.7 
29.2 
30.8 

52.9 
56.0 
56.0 
57.5 

50.5 
53.5 
53.5 
52.5 

3.5 
4.8 
3.9 
4.0 

2.6 
3.1 
2.7 

4.8 

1.6 
L7 
1.6 
1.7 

1.9 
1.1 
3.1 
1.4 

100 

No  2d 

100 

No.  3« 

100 

No.  4/ 

100 

Sample  1464— 

No  le 

100 

No  2d        

100 

No.3« 

100 

No  4/           ... 

100 

U.  S.  Bureau  of  Mines'  avor- 
ftse  of  20  tests 

29.9 

29.4 

32.9 

(«») 

100 

a  Loss  included  in  coke. 
b  Ijoss  included  in  residuum 
c  Engler  method. 


d  Ubbel(dide  method, 
e  Regnault  method. 
/  Nawratil  method. 


REDUCTION  IN   CRUDE   OIL  PRICE. 


27 


■i 


i^ 


All  of  the  records  of  tests  appearing  in  the  foregoing  table  are 
from  samples  taken  from  single  wells,  except  in  the  case  of  the 
United  States  Bureau  of  Mines,  which  is  the  average  of  20  samples, 
taken  with  the  special  view  of  securing  a  representative  test  of  the 
field.  All  of  the  tests,  except  those  made  by  and  for  the  Bureau  of 
Mines,  were  made  on  behalf  of  the  producers.  It  will  be  observed 
that  there  are  wide  variations  between  the  results  of  these  tests. 
This  is  partly  due  to  the  differences  in  chemical  composition  of  the 
samples  tested,  the  method  used  in  testing,  and  the  aim  of  the  per- 
son making  the  test  to  produce  the  largest  proportions  of  certain 
products,  at  the  expense  of  other  possible  products.  That  the 
differences  were  partly  due  to  chemical  composition  of  the  samples 
is  indicated  by  the  different  Baume  tests  of  the  crude  analyzed. 

The  gravity  of  the  crude  tested  varied  from  30.3°  to  33.7°  B. 
scale.  As  has  already  been  stated  (see  p.  20),  the  average  gravity 
of  the  crude  oil,  as  it  leaves  the  field  for  Texas,  is  31.6°,  and  when 
run  by  the  Corsicana  refinery,  is  31.36°  B.  This  closely  corresponds 
with  the  Bureau  of  Mines'  average  of  20  samples  taken  fresh  from 
the  wells,  which  was  31.57°.  These  differences  in  gravity  of  the 
samples  tested  account  in  part  for  the  differences  shown  in  the  total 
content  of  naphtha,  gasoline,  and  kerosene,  which  varied  from  36.8 
per  cent  to  55.3  per  cent.  It  seems  probable,  however,  that  most  of 
the  differences  found  in  this  respect  were  due  to  the  method  used  and 
the  manipulation  of  the  apparatus  by  the  persons  making  the  tests, 
in  order  to  produce  more  of  certain  products  at  the  expense  of  others 
which  were  not  desired. 

The  differences  due  to  method  are  best  shown  by  the  elaborate  tests 
made  by  M.  C.  Whitaker,  who  used  four  different  methods  for  each 
sample  tested.    The  following  extract  from  his  report  is  in  point :  • 

A  comparison  of  the  results  obtained  shows  a  wide  discrepancy  in  amounts 
of  the  various  products  obtained  by  the  several  methods  of  analysis,  and  this 
difference  is  especially  great  in  the  case  of  the  "naphtha."  On  sample  No. 
1464  about  one  and  three-fourths  times  as  much  "naphtha"  is  obtained  by 
the  Engler  method  as  by  the  Regnault  method,  whereas  in  sample  No.  1470 
the  "naphtha"  obtained  by  the  Nawratil  method  is  less  than  one-third  that 
obtained  by  the  Engler  method.  The  variations  shown  in  the  analysis  of  your 
oils  by  the  different  methods  are  directly  in  accord  with  our  previous  exi>erience, 
extending  over  a  number  of  years.  We  do  not  consider  any  of  the  existing 
methods  as  dependable.  It  is  doubtful  if  any  of  these  methods  will  give  results 
even  approximating  those  attained  in  practical  distillation.  We  frequently 
encounter  disputes  between  producer  and  refiner  as  to  the  proiier  evaluation 
of  an  oil  due  to  a  difference  in  results  obtained  by  different  methods  of 
analysis.  We  have  frequently  urged,  and  still  urge,  that  the  whole  question 
of  crude  oil  analysis  and  method  of  valuation  be  subjected  to  the  most  thorough 
investigation  with  a  view  to  establishing  a  standard  method  of  analysis  and 

report. 

•  For  full  report,  see  Exhibit  9,  p.  103. 


28 


CONDITIONS  IN    THE   HEALDTON   OIL   FIELD. 


The  results  of  the  tests  made  by  the  Bureau  of  Mines  on  20 
samples  are  those  which  deserve  the  most  weight.  According  to  the 
testimony  of  Irving  C.  Allen,  petroleum  chemist  of  the  Bureau  of 
Mines,  the  aim  of  the  Bureau  of  Mines  is  to  use  a  standard  method 
for  testing  all  kinds  of  crude  oils.  The  following  extract  from  the 
record  of  the  Oklahoma  Corporation  Commission  hearing  on  June  9 

shows  this:° 

Dr.  Allen.  ♦  •  *  What  the  Bureau  of  Mines  is  trying  to  do  is  to  get  the 
products  out  of  the  oil  without  decomposition,  without  degradation  of  the 
product.  And  with  our  method  of  distilling  we  use  an  electric  still.  We  dis- 
till off  all  the  oil,  including  the  lubricants  or  a  greater  part  of  the  lubricants, 
without  cracking  the  crude  at  all.  With  these  other  methods  we  can  get  a 
much  higher  yield  of  gasoline  by  cracking  the  contents  of  the  still  and  sacrific- 
ing the  lubricating  oil. 

Q.  But  the  general  results  from  all  methods  and  any  method  that  you  might 
use  will  arrive  at  comparative  value  of  the  different  oils. — ^A.  The  method  we 
use,  we  try  to  standardize  it  so  we  can  have  it  absolutely  under  control.  We 
say  these  products  are  gotten  from  the  crude  without  decomposition  of  the  oil 
in  any  way.  You  might  say  it  is  the  natural  product  of  the  oil,  and  those,  of 
course,  can  be  varied  at  the  will  of  the  operator. 

Commissionei*  Henshaw: 

Q.  Now,  he  can  increase  the  amount  of  the  gasoline  and  decrease  the  amount 
of  the  kerosene. — ^A.  Yes,  sir. 

Q.  Or  vice  versa? — A.  Certainly,  it  is  quite  the  common  practice  to  run  for 
the  markets  only. 

At  the  time  Mr.  Allen  submitted  the  tables  showing  the  results 
of  the  Bureau  of  Mines'  tests,  he  also  furnished  the  following  state- 
ment in  regard  to  the  tests :  * 

The  percentages  of  distillates  from  laboratory  determinations  may  be  made 
to  vary  greatly,  depending  on  the  method  used  in  the  analysis.  Although  labo- 
ratory determinations  are  not  comparable  with  refinery  runs,  they  are  useful 
for  purposes  of  comparing  oils  of  different  origin  and  from  different  fields, 
and  they  enable  an  analyist  thoroughly  informed  on  the  details  and  principles 
of  any  particular  laboratory  method  of  analysis  and  having  a  knowledge  of 
refining  practices,  to  determine  the  value  of  an  oil  for  refining  purposes. 

If  it  be  desired  to  re-run  the  above  naphthas  for  gasoline,  the  above  per- 
centages of  gasoline  can  be  thereby  increased  from  five  to  ten  per  cent. 

The  quantity  and  quality  of  the  other  products  also  can  be  materially 
changed  by  re-running  [re-distilling]  the  respective  distillates,  and  a  great 
variety  of  products  may  be  produced  therefrom. 

From  the  above  lubricating  distillates,  from  8.5  to  1.5  per  cent  of  parafRiie 
wax  can  be  obtained. 

From  the  above  residues,  there  can  be  obtained  by  vacuum  and  steam  treat- 
ment an  additional  quantity  of  heavy  lubricant. 

In  short,  the  above  tests  would  lead  one  to  believe  that  first  class  refined 
products  can  be  economically  produced  from  the  Healdton  oils. 

•Transcript  of  Corporation  Commission  hearing,  pp.  9  and  10. 

*  Transcript  of  Corporation  Commission  hearing,  State  Exhibit,  Allen  No.  1. 


REDUCTION  IN   CRUDE   OIL   PRICE. 


29 


It  is  evident  from  Mr.  Allen's  testimony  that  the  refining  value  of 
a  crude  oil,  as  measured  by  a  standard  method  applicable  to  all  kinds 
of  crudes,  may  not  indicate  the  commercial  value  of  a  particular 
crude  for  refining  purposes  based  on  the  market  values  of  the  dif- 
ferent products  procured  from  it.  The  importance  of  this  distinc- 
tion is  seen  from  the  fact,  already  stated,  that  lubricants  are  manu- 
factured from  only  a  small  proportion  of  the  crude  oil  capable  of 
furnishing  lubricants  which  is  refined  west  of  the  Mississippi  River. 
The  market  conditions  thus  far  have  favored  the  production  of 
gasoline,  illuminating  oil,  and  fuel  oil,  and  even  some  refineries 
equipped  to  make  lubricants  refine,  for  that  purpose,  only  a  small 
proportion  of  the  available  residues  of  the  crude  oil  which  they  run. 

The  Laboratory  Barrel-still  Tests. — ^In  the  barrel-still  test  the 
crude  oil  is  distilled  in  a  miniature  still  under  conditions  more  like 
those  of  refining  on  a  commercial  scale  than  are  obtainable  through 
the  distilling-flask  method.  The  quantity  of  oil  run  in  some  barrel- 
still  tests  has  been  as  high  as  50  gallons,  while  that  used  in  the  dis- 
tilling flasks  usually  is  from  100  to  500  cubic  centimeters  (from  3.38 
to  16.9  fluid  ounces).  The  larger  quantities  of  the  resultant  products 
secured  with  the  barrel-still  facilitates  the  "  finishing "  of  the  prod- 
ucts of  the  first  distillation  into  refined  products  meeting  definite 
commercial  standards.  Because  of  the  close  approximation  of  the 
results  shown  by  barrel-still  tests  to  those  obtainable  in  actual  refin- 
ing on  a  commercial  basis,  this  method  is  often  used  by  refiners.  All 
of  the  barrel-still  tests  for  which  the  Bureau  of  Corporations  was 
able  to  secure  records  were  made  at  refineries  by  practical  refiners. 
In  six  of  them  no  attempt  was  made  to  carry  the  testing  process 
further  than  the  extraction  of  the  naphtha  and  kerosene,  the  residue 
being  classed  as  fuel  oil.  In  four  of  them  the  process  followed  gave 
gas  oil;  and  in  two,  engine  oil  lubricating  stock  was  obtained, 
although  no  further  attempt  was  made  to  produce  commercial  engine 
oils.  One  test  was  carried  to  the  point  of  securing  cylinder  oil  of 
commercial  grade,  and  in  another  test  commercial  engine  oils  were 
made.  The  following  table  shows  the  results  of  the  various  barrel- 
still  tests: 


30 


CONDITIONS  IN   THE  HEALDTON   OIL  FIELD. 


Table  3.-LABORATORY  BARREI^STILL  TESTS  MADE  TO  DETERMINE  THE  REFINING 

QUALITIES  OF  HEALDTON  CRUDE  OIL. 


Test  made  by- 


Cosden  &  Co 

Oklahoma    Re- 
finery Co.: 
No.l 


No.2 , 

Magnolia  Petro- 
leum Co.: 

No.l 

No.2 

No.  3 

No.4 

No.  5 

Sun  Co.: 

No.  1« 

No.2<l 


Where  test  was 
made. 


Tulsa,  Okla. 


Oklahoma  City, 

Okla. 
....do 


Date. 


1914. 
AprU 


.do. . . 


.do 


Corsicana,  Tex . . 
Beaumont,  Tex. 
do 


.do. 
.do. 


Toledo,  Ohio. 
do 


Feb.  25.. 
Mar.  15.. 
Mar.  17.. 
July... 
..do... 


Quan- 
tity 
tested. 


Gravity 
of  crude 
oil. 


Ibbl. 

50  gal. 
50  gal.. 


Ibbl. 
40  gal. 
12  gal. 
45  gal. 
Ibbl. 

Ibbl. 
Ibbl. 


Deg.  B. 
31.7 


30.5 
34.0 


29.1 
33.2 
30.9 
30.6 
30.6 

31.4 
31.4 


Sulphur  content  by  weight. 


Crude    Naph- 
oil.        tha. 


Perct. 


0.660 
.714 
.638 


Perct. 


Kero- 
sene. 


Perct. 


0.031 
.040 


o  0.155 

6.161 

.161 


Oas  oil. 


Perct. 


Fuel 
oU. 


Perct. 


0.385 


a  926 
.900 
.006 


Test  made  by — 


Cosden  &Co 

Oklahoma  Refinery  Co.: 

No.l 

No.2 

Magnolia  Petroleum  Co.: 

No.l 

No.2 

No.3 

No.4 

No.5 

Sim  Co.: 

No.  ic 

No.2< 


Products. 


Naphtha. 


Gravity. 


Deg.  B. 
58.2 

53.0 
55.0 

51.2 
66.6 
59.4 


58.1 


54.0 


Percent. 


«16.1 

7.5 
17.5 

5.0 

10.0 

5.0 


7.5 

12.0 
10.0 


Gasoline. 


Gravity. 


Deg.  B. 


61.0 


Percent. 


5.0 


Kerosene. 


Gravity. 


Deg.  B. 
42.7 

41.0 
41.5 

41.3 

a  46. 2 

6  45.3 

43.7 

43.4 


45.0 


Per  cent. 


20.5 

22.5 
22.5 

25.0 
25.0 
25.0 
13.3 
25.0 

15.0 
15.0 


Total 
naphtha, 
gasoline, 

and 
kerosene. 


Percent. 
36.6 

30.0 

4ao 

30.0 
35.0 
30.0 
13.3 
32.5 

27.0 

3ao 


•  Weighted  average.  Original  returns  show  water-white  oil,  45.7  gravity,  16  per  cent,  0.146  sulphur; 
common  oil,  46.9  gravity,  10  per  cent,  0.169  sulphur. 

»  Weighted  average.  Original  returns  show  water-white  oil,  44.6  gravity,  15  per  cent,  0.155  sulphur; 
common  oil,  46.4  gravity,  10  per  cent,  0.170  sulphur. 

c  Steam-still  test. 

4  Dry-heat  test. 

«  Returned  as ' '  benzine.*! 


REDUCTION   IN   CRUDE   OIL  PRICE. 


31 


Table  3.— LABORATORY  BARREL-STILL  TESTS  MADE  TO  DETERMINE  THE  REFINING 

QUALITIES  OF  HEALDTON  CRUDE  OIL— Continued. 


Products— Continued. 

Test  made  by— 

GasoU. 

Fuel  oil. 

Engine 

oil 
lubri- 
cating 
stock. 

Cylin- 
der oil 
stock. 

Wax 

tailing. 

Coke. 

Loss. 

Grav- 
ity. 

Per 
cent. 

Grav- 
ity. 

Per 
cent. 

Total. 

Cosden  &  Co 

Deg.  B. 

Deg.B. 
23.0 

26.0 
26.0 

O60.9 

6  70.0 
57.5 

6  70.0 
63.0 
68.0 

C20.0 

Perct. 

Perct. 

Perct. 

Perct. 

Perct. 
2.50 

(») 
2.50 

(P) 
2.00 
2.00 

33.40 
2.78 

3.00 
5.00 

Perct. 
100 

Oklahoma  Refinery 
Co.: 
No.l 

100 

No.2 

100 

Magnolia  Petroleum 
Co.: 
No.  1 

100 

No.2 

24.0 
24.1 
28.1 

100 

No.3  ..  .. 

100 

No.4 

36.0 
35.9 

13.3 
27.5 

«25.0 
•  30.0 

30.0 

35.0 
35.0 

20.0 

100 

No.5 

2.5 

4.72 

100 

Sun  Co.: 

No.  1*      . 

/10.0 

100 

No.  2^.  .. 

100 

«  Returned  as  "residuum." 

6  Loss  included  in  fuel-oil  percentage. 

c  Returned  as  "nondescript"  oil  fit  only  for  fueL 

d  Steam-still  test. 


*  Called  gas  or  fuel  oil. 
/  Called  road  or  fuel  oiL 
ff  Dry-heat  test. 


In  the  above  tests,  as  in  the  laboratory  distilling-flask  analyses  of 
Healdton  crude  (see  Table  2),  there  were  important  differences  in 
the  gravity  of  the  samples,  the  highest  gravity  being  34.0°  and  the 
lowest  29.1°  B.  scale.  Furthermore,  there  were  differences  in  the 
results  obtained,  due  to  the  fact  that  some  of  the  tests  were  made  by 
the  "topping"  method — i.  e.,  to  secure  naphtha,  gasoline,  kerosene 
and  fuel  oil — while  other  tests  were  made  with  the  view  of  also 
ascertaining  the  lubricant  possibilities.  As  for  the  tests  shown  in 
Table  2,  all  of  the  products  were  not  carried  to  a  finished  commer- 
cial form. 

The  total  naphtha,  gasoline,  and  kerosene  contents  varied  in  the 
distilling-flask  tests  (Table  2)  from  36.8  per  cent  to  56.3  per  cent, 
while  in  the  barrel-still  tests  (Table  3)  they  varied  from  13.3  per 
cent  to  40.0  per  cent  of  the  volume  of  the  crude  tested.  In  the  results 
from  the  distilling-flask  tests  12  of  the  16  (counting  the  Bureau  of 
Mines'  average  of  20  samples  as  only  one  test)  showed  a  content  of 
40  per  cent  and  over.  In  the  results  from  the  barrel-still  tests,  7  of 
the  10  showed  a  content  of  under  33  per  cent.  The  results  of  regular 
commercial  refinery  operations,  shown  below  in  Table  4  (see  p.  36), 
showed  a  total  naphtha,  gasoline,  and  kerosene  content  for  886,254 
barrels,  refined  by  the  Magnolia  Petroleum  Co.  at  its  Corsicana,  Tex., 


32 


CONDITIONS  IN  THE  HEALDTON  OIL  FIELD. 


REDUCTION  IN  CBUDE  OIL  PRICE. 


33 


i 


refinery,  to  be  29.8  per  cent.  The  results  from  the  barrel-tests  of  the 
Healdton  crude  were  in  closer  conformity  with  those  of  actual  refinery 
operations  than  were  the  distilling-flask  analyses. 

The  refinery  runs.— At  the  Corporation  Commission  hearing  of 
June  9  Irving  C.  Allen,  of  the  Bureau  of  Mines,  testified  at  some 
length  concerning  the  reason  for  the  wide  discrepancies  found  be- 
tween the  results  of  laboratory  distilling-flask  analyses  of  Healdton 
crude  made  by  different  chemists,  due  to  the  lack  of  uniformity  in 
their  methods  of  making  the  tests.  The  following  extracts  from  the 
record  of  the  hearings  bear  on  the  subject : " 

Q.  A  more  satisfactory  analysis  of  oil  then  is  really  a  distillery  run,  is  It? — 
A.  That  is  the  only  thing  that  is  of  real  value.  The  laboratory  methods,  though 
not  comparable  with  the  refinery  run,  give  the  express  analysis,  and  if  the 
analyst  is  also  familiar  with  the  refinery  methods  a  very  close  analysis  of  what 
that  oil  will  do,  but  the  average  analyst  is  not  a  refinery  man.  Now  with 
these  very  greatly  varying  results  it  will  probably  enlighten  you  somewhat  on 
the  very  great  disagreement  among  the  various  analysts  on  this  Healdton  oil. 
Professor  M.  C.  Whitaker  made  an  analysis  for  us  last  week,  he  ran  four  differ- 
ent methods.  He  said  it  was  Just  as  much  right  to  run  one  as  the  other  and  he 
varied  30  to  90  per  cent. 

Later,  when  cross-examined  by  counsel  for  the  Magnolia  Pipe  Line 

Co.,  Mr.  Allen  stated :  ^ 

Q.  Mr.  Allen  in  making  these  tests  you  used  the  same  kind  of  still  and  the 
same  temperatures  for  the  different  oils?— A.  Yes,  sir,  exactly  the  same  method, 
being  very  careful  to  get  the  temperatures  exactly  the  same.  Everything  is 
standardized  as  much  as  we  can  make  it. 

Q.  Have  you  ever  had  any  practical  experience  as  a  refiner? — ^A.  No,  sir.  I 
have  been  through  a  great  many  of  them  and  talked  to  a  great  many  refiners. 

Q.  But  you  say  the  refiners  can  make  about  the  same  difference  that  the 
small  laboratory  tests  can?— A.  They  do  make  the  same  difference.  I  notice 
in  the  reports  here  published  in  the  papers  in  regard  to  this  hearing  that  the 
gasoline  varies  very  greatly.  It  seems  to  be  the  only  thing  they  are  thiiik- 
ing  of. 

In  this  testimony  Mr.  Allen  touches  on  the  reason  why  the  results 
of  a  refinery  run  when  considered  from  a  strictly  scientific  stand- 
point can  not  be  accepted  as  conclusive  determination  of  the  relative 
refining  quality  of  a  given  crude  oil,  when  compared  with  other 
crude  oils.  The  refiner  adopts  that  particular  refining  process  for 
use  with  any  given  crude  oil  which  he  believes  will  pay  him  best, 
taking  into  consideration  the  chemical  composition  of  the  oil,  the 
character  of  the  equipment  of  his  refinery,  and  the  values  of  the 
different  products  which  can  be  obtained  from  it  in  the  markets 
which  are  available  to  him.  In  the  selection  of  those  products  which 
he  endeavors  to  get  from  the  given  crude  he  is  guided  somewhat  by 

•  Transcript  of  Corporation  Commission  hearing,  p.  9. 

•  Trajiscript  of  Corporation  Commission  hearing,  p.  11. 


I 


the  expense  of  the  process  needed  to  secure  them  and  somewhat  by 
the  availability  of  other  crudes,  from  which  the  same  products  can 
be  obtained,  but  in  different  proportions  and  at  a  different  cost. 

The  commercial  value  of  a  particular  crude,  to  a  refiner,  is  de- 
pendent on  all  of  the  foregoing  factors.  The  actual  returns  of  re- 
finery runs,  made  subject  to  such  conditions,  in  a  well-equipped  and 
well-managed  refinery,  afford  the  best  and  most  practical  means  for 
judging  the  commercial  value  of  a  given  crude  in  the  market  to 
which  it  is  practicable  to  transport  it.  It  is  for  this  reason  that  great 
weight  should  be  placed  on  the  results  of  the  regular  refinery  runs 
made  of  Healdton  crude  by  the  Corsicana  refinery  of  the  Magnolia 
Petroleum  Co.  The  Bureau  has  carefully  verified  from  the  records 
of  this  company  the  information  regarding  refinery  runs  which  ap- 
pears in  this  report.  It  has  carefully  examined  the  refinery-run  rec- 
ords and  those  of  the  various  tests  made  on  the  crude  oil  and  the 
finished  products,  and  has  in  many  instances  traced  the  sales  of  the 
products  into  the  hands  of  bona  fide  consumers. 

A  refinery-test  run  of  Healdton  crude  oil  was  made  on  May  12  and 
13  at  the  Coalton,  Okla.,  refinery  of  the  C.  D.  Webster  Oil  Co.,  under 
the  personal  supervision  of  Guy  Y.  Williams,  of  the  department  of 
chemistry.  University  of  Oklahoma,  and  C.  D.  Webster.  The  quan- 
tity refined  was  1,972.6  gallons  (46.97  barrels).  The  Bureau  obtained 
from  Mr.  Williams  a  copy  of  his  report  on  this  test  which  he  made 
to  Governor  Cruce,  of  Oklahoma,  and  from  Mr.  Webster  a  copy  of 
his  report  on  the  test  which  he  sent  to  Wirt  Franklin.  Both  Mr. 
Williams  and  Mr.  Webster  called  attention  to  the  fact  that  the  tank 
car  in  which  the  crude  oil  arrived  at  the  refinery  was  unsealed  and 
the  lid  practically  off,  and  that  probably  there  had  been  a  loss  by 
volatilization  of  the  lighter  constituents  of  the  crude  while  ijn  transit. 

The  Magnolia  Petroleum  Co.  made  three  test  runs  at  its  Corsicana 
refinery  to  determine  the  refining  qualities  of  Healdton  crude.  The 
first  test  run  consisted  of  5,512  barrels  and  was  made  on  April  3.  The 
second  consisted  of  3,500  barrels  and  was  made  on  April  17.  In  the 
first  two  tests  the  crude  was  finished  into  marketable  products.  The 
third  test  of  3,460  barrels  was  made  on  May  14.  The  test  was  not 
carried  through  to  the  point  of  finishing  the  products  into  marketable 
shape. 

In  order  to  show  the  difference  between  the  results  of  the  two 
refinery  tests  of  April  3  and  May  14,  the  following  statement  has 
been  prepared.  It  shows  for  the  April  3  test  the  3^ields  previous  to 
finishing  the  products,  so  that  they  are  comparable  with  those  of 
the  May  14  test  run. 

76568°— 15 3 


34 


CONDITIONS  IN   THE  HEALDTON   OIL  FIELD. 


AprU  3. 

May  14. 

Barrels. 

Per  cent. 

Barrels. 

Per  cent. 

Crude  naDhthn             

553 

1,024 

3,845 

90 

10.0 

18.6 

69.8 

1.6 

510 

569 

2,324 

57 

14.7 

Refined  distillate             

16.4 

Fuel                 

67.2 

Loss 

1.7 

Total      

5,512 

100.0 

3,460 

100.0 

In  the  foregoing  comparison  may  be  found  an  illustration  of  the 
point  of  Mr.  Allen's  remarks  in  his  testimony  quoted  on  page  32, 
where  he  stated  that  refiners  could  make  the  same  differences  with 
respect  to  the  results  obtained,  in  the  case  of  refinery  runs,  as  could 
be  obtained  in  making  small  laboratory  tests.  The  gravity  of  the 
crude  used  in  the  April  3  test  was  31.5°  B. ;  that  of  the  crude  used  in 
the  May  14  test  was  not  given.  The  average  gravity  of  the  Healdton 
crude  refined  at  the  Corsicana  refinery  during  the  month  of  May  was 
31.4°  B.,  which  probably  is  practically  the  same  as  that  of  the  crude 
used  in  the  test  run.  The  differences  in  the  results  obtained,  since 
the  gravity  of  the  crude  used  was  about  the  same,  must  therefore  be 
attributed  to  the  difference  in  the  method  used  in  refining.  Not  only 
was  the  total  naphtha  and  refined  distillate  content  in  the  May  14 
test  (31.1  per  cent  of  the  total  volume  of  crude  refined)  higher  than 
that  in  the  April  3  test  (28.6  per  cent),  but  the  naphtha  content, 
which  is  more  valuable  than  the  refined  distillate,  was  14.7  per  cent 
in  the  May  14  test  and  10  per  cent  in  the  April  3.  Notwithstanding 
the  more  valuable  results  obtainable  by  the  method  used  in  the  May  14 
test,  it  would  not  be  profitable.  On  this  point,  speaking  of  the  May 
14  test,  W.  H.  Hastings,  superintendent  of  the  Corsicana  refinery, 
stated : 

This  test  is  not  on  commercial  lines.  The  first  steaming,  which  is  not  usual, 
Is  responsible  for  an  unusually  large  per  cent  of  stove  distillate.  This  steaming 
would  not  be  profitable  in  practice. 

The  experience  of  both  the  Magnolia  Petroleum  Co.  and  the 
Pierce-Fordyce  Oil  Association  is  that  it  is  not  practicable  in  run- 
ning for  commercial  purposes  to  refine  Healdton  crude  by  itself. 
In  order  to  get  the  gasoline  and  kerosene  contents  that  will  meet 
commercial  requirements,  it  has  been  found  necessary  to  "  sweeten '' 
it  with  a  small  proportion  of  the  high-grade  crudes.  The  Magnolia 
Petroleum  Co.,  at  their  Corsicana  refinery,  used  Electra  and  light 
Corsicana  crudes  for  this  purpose,  and  the  Pierce-Fordyce  Oil  Asso- 
ciation used  Cushing  crude. 


•  A 


% 


*  4» 


i 

4 


REDUCTION  IN   CRUDE   OIL  PRICE. 


35 


The  Magnolia  Petroleum  Co.,  during  the  period  April  1  to  Sep- 
tember 30,  inclusive,  refined  a  total  of  959,372  barrels  of  crude  oil,  of 
which  886,254  barrels  were  Healdton  crude  and  73,118  barrels  were 
Electra  and  Corsicana  crudes.  The  records  of  the  refinery  were  kept 
in  such  a  manner  that  it  was  possible  to  secure  a  separate  statement 
of  the  yields  from  Healdton  crude,  apart  from  those  of  the  other 
crudes  refined  during  that  period. 

In  the  case  of  the  Pierce-Fordyce  Oil  Association  it  was  not  pos- 
sible to  secure  a  statement  of  the  yield  derived  from  Healdton  crude 
separately.  Furthermore,  in  the  contract  between  the  Pierce- 
Fordyce  Oil  Association  and  the  Magnolia  Petroleum  Co.,  the 
Pierce-Fordyce  Oil  Association  had  the  option  of  turning  back  to 
the  Magnolia  Petroleum  Co.  at  the  same  price  that  it  paid  for  the 
crude  oil  (75  cents  per  barrel),  the  fuel  oil  which  it  derived  from 
refining  the  crude,  after  removing  naphtha  and  refined  oil  distillates 
amounting  to  not  less  than  20  per  cent  nor  more  than  30  per  cent  of 
the  volume  of  the  crude.  It  is  probably  because  of  the  terms  of  the 
contract,  which  enabled  the  Pierce-Fordyce  Oil  Association  to  take 
off,  if  it  so  chose,  not  less  than  20  per  cent  of  the  volume  of  the  crude 
that  the  results  of  refining  364,729  barrels,  of  which  335,259  barrels 
were  Healdton  crude,  23,906  barrels  were  Cushing  crude,  and  5,564 
barrels  were  rerun  distillate  (source  of  crude  not  stated),  show  79.4 
per  cent  of  the  total  yield  as  fuel  oil. 

The  inclusion  of  the  Cushing  crude  gives  a  larger  proportion  of 
naphtha,  gasoline,  and  kerosene  than  would  be  the  case  if  the  yield 
of  the  Healdton  crude  could  be  obtained  separately.  On  the  other 
hand,  the  terms  of  the  contract  were  favorable  to  the  running  of  a 
larger  proportion  of  the  crude  into  fuel  oil  than  otherwise  would 
have  been  the  case.  The  Bureau  has  no  means  of  judging  how  far 
tliese  two  causes,  one  tending  to  increase  and  the  other  to  diminish 
the  proportion  of  naphtha,  gasoline,  and  kerosene  in  the  resultant 
yield,  offset  each  other.  Since  the  Pierce-Fordyce  Oil  Association 
had  the  option  of  turning  into  distillate  30  per  cent  of  the  volume  of 
(he  Healdton  crude,  if  it  so  desired,  it  is  probable  that,  under  the 
then  existing  market  conditions,  the  company  found  it  more  profit- 
oble  to  limit  itself  to  taking  only  about  20  per  cent. 

The  following  table  presents  the  results  of  three  refinery-test  runs, 
and  the  results  of  the  regular  refinery  operations  of  the  Magnolia 
Petroleum  Co.  and  Pierce-Fordyce  Oil  Association. 


36 


CONDITIONS  IN   THE   HEALDTON   OIL  FIELD. 


Table  4.— RESULTS  OF  REFINERY   TESTS  AND   REGULAR  REFINING  OPERATIONS 

USING  HEALDTON  CRUDE  OIL. 


Run  made  by- 


C.  D.  Webster  Oil  Co. 
Magnolia  Petroleum 
Co.: 

No.l 

No. 2 

No.  3 

Pierce-Fordyce       Oil 

Association. 


Where  test  or  run 
was  made. 


Coalton,  Ok  la. 


Corslcana,  Tex 

.....do 

.....do 

Fort  Worth,  Tex.. 


Date, 


1914. 
May  12-13. 


Apr.  3 

Apr. 17 

Apr. -Sept. 
Aug.  -Sept 


Quan- 
tity 
run. 


Barrels. 
47 


5,512 
3,500 

886,254 
6364,729 


Crude 

oil, 
gravity, 


Deg.B. 
32.00 


31.50 


31.36 


Product. 


Naphtha. 


Grav- 
ity. 


Deg.B. 


62.4 
61.3 
56.3 


Per 
cent. 


07.3 
9.6 
2.9 
1.9 


Gasoline. 


Grav- 
ity. 


Deg.  B. 
56.9 


64.0 


Per 
cent. 


12.3 


5.3 

8.6 


Run  made  by— 


CD.  Webster  Oil  Co 

Magnolia  Petroleum  Co: 

No.l 

No. 2 

No.3 

Pierce-Fordyce  Oil  Association 


Product— Continued. 


Kerosene. 


Gravity.  I  Per  cent. 


Deg,  B. 

44.0 

44.9 

d42.7 

43.3 


30.6 

20.9 

25.8 

21.6 

9.7 


Total 
naphtha, 
gasoline, 
and  kero- 
sene. 


Per  cent. 
42.8 

28.2 
35.4 
29.8 
20.2 


Fuel  oil. 


Gravity. 


Deg.  B. 
24.0 

23.6 
23.1 


Per  cent. 


c  67.2 

69.8 
62.6 
68.7 
79.4 


Loss. 


Per  cent. 
(c) 

2.0 

2.0 

1.5 

.4 


Total. 


Percent. 
100 

100 

100 
100 
100 


a  Original  records  show  4.1  per  cent  engine  naphtha,  57.4"  B.  test;  3.2  per  cent  D.  S.  gasoline,  69"  B.  test. 

f-  Includes  91.9  per  cent  Healdton  crude,  6.6  per  cent  Cushing  crude,  and  1.5  per  cent  of  rerun  distillate; 
origin  of  crude  not  stated. 

c  Loss  included  in  fuel-oil  percentage. 

d  Weighted  average.  Original  records  show  6.5  per  cent  W.  W.  120"  fire  test,  45.5°  B.  test;  19.3  per  cent 
S.  W.  112°  fire  test,  41.8°  B.  test. 

Although  in  the  case  of  the  first  test  some  of  the  lighter  constit- 
uents of  the  crude  oil  may  have  been  reduced  through  evaporation, 
while  the  crude  oil  was  in  transit  from  the  Healdton  field  to  the  Coal- 
ton  refinery,  because  the  lid  was  off  the  car,  the  gravity  shown  at  the 
time  of  the  refinery  run,  32.0°  B.,  is  higher  than  that  shown  for 
any  of  the  other  tests,  and  for  the  regular  refinery  operations.  No 
gravity  was  shown  for  the  test  run  made  by  the  Magnolia  Petroleum 
Co.,  but  it  was  probably  about  31.5°  B.,  which  was  the  average 
gravity  of  the  crude  refined  at  the  Corsicana  refinery  during  the 
month  of  April. 

Some  of  the  differences  in  the  proportion  of  the  lighter  products 
can  be  accounted  for  by  the  differences  in  the  gravities  of  the  finished 
naphtha  and  gasoline,  as  larger  proportion  of  low  gravity  than  of 


'  «^ 


/ 


A 


REDUCTION  IN  CRUDE  OIL  PRICE. 


37 


high  gravity  product  can  be  obtained.  It  should  be  noted,  however, 
that  there  was  a  wide  difference  between  the  total  naphtha,  gasoline, 
and  kerosene  content  of  the  different  tests,  that  of  April  3  test  of 
the  Magnolia  Petroleum  Co.  showing  28.2  per  cent;  of  the  April  IT 
test  showing  35.4  per  cent;  and  of  the  Webster  test,  42.8  per  cent. 
The  test  of  April  3,  of  the  Magnolia  Petroleum  Co.,  corresponds 
most  closely  with  the  actual  results  from  the  refinery  of  886,254 
barrels,  from  April  to  September,  inclusive,  as  will  be  noted  by  the 
following  comparison : 


Product. 


Naphtha. . . 
Gasoline... 
Kerosene... 

Fuel  oil 

Loss 

Total 


Test  of  Apr.  3, 1914. 


Per  cent. 


4.1 

3.2 

20.9 

69.8 

2.0 


lOO.O 


Baum6 
test. 


Degrees. 
57.4 

69.0 
44.9 
23.6 


Refinery  run  April 
to  September,  1914. 


Per  cent. 


2.9 

5.3 

21.6 

68.7 

1.5 


100.0 


BaumS 
test. 


Degrees. 
56.3 
64.0 
43.3 


On  account  of  the  facts  already  stated  concerning  the  conditions 
under  which  the  Pierce-Fordyce  Oil  Association  operated,  the  Bu- 
reau does  not  consider  the  actual  refinery-run  results  obtained  by 
the  Pierce-Fordyce  Oil  Association  refinery  as  valuable  as  those  of 
the  Magnolia  Petroleum  Co.  for  the  determination  of  the  yields  to  be 
obtained  from  refining  Healdton  crude  under  the  usual  commercial 
conditions.  The  six  months'  experience  of  the  Magnolia  Petroleum 
Co.'s  refinery  is  the  most  authoritative  information  on  the  subject. 

A  comparison  of  the  results  of  the  six  months'  refinery  operations 
of  the  Corsicana  refinery  of  the  Magnolia  Petroleum  Co.  with  the 
results  of  the  distilling-flask  tests  shown  in  Table  2  and  the  barrel- 
still  tests  shown  in  Table  3  shows  that  every  distilling-flask  test 
indicated  a  higher  total  content  of  naphtha,  gasoline,  and  kerosene 
for  the  crude  than  was  borne  out  in  the  actual  refining  experience. 
The  lowest  per  cent  of  these  products  shown  in  such  tests  was  36.8 
per  cent,  the  highest  55.3  per  cent,  12  of  the  16  showing  over  40  per 
cent,  w  hile  the  refinery  runs  for  six  months  on  886,254  barrels  showed 
but  29.8  per  cent.  In  the  case  of  the  barrel-still  tests,  a  comparison 
between  them  and  the  Corsicana  refinery  run  shows  a  much  closer 
correspondence.  Of  the  10  tests,  6  sho^ved  a  total  naphtha,  gasoline, 
and  kerosene  content  between  27  and  33  per  cent,  and  the  remaining 
4  showed  30  per  cent,  which  is  approximately  the  proportion  obtained 
by  the  refinery. 


38 


CONDITIONS  IN   THE   HEALDTON   OIL  FIELD. 


Section  4.  The  manufacture  of  lubricants  from  Healdton  crude  oil. 

It  has  been  claimed  in  support  of  the  contention  that  Healdton 
crude  oil  has  valuable  refining  qualities,  that  lubricants  can  be  manu- 
factured from  it.  The  contention  of  the  Magnolia  company's  re- 
finers on  this  point  is,  that  while  it  is  possible  to  manufacture  good 
engine  oils,  it  is  not  profitable  to  do  so,  due  to  the  fact  that  other 
crudes  are  better  adapted  for  the  purpose. 

The  opinion  of  Mr.  Allen,  based  on  the  results  of  the  United  States 
Bureau  of  Mines'  tests,  on  the  lubricating  values  has  already  been 
quoted.  (See  p.  28.)  He  was  cross-examined  by  counsel  for  the 
Magnolia  Pipe  Line  Co.  on  the  refining  difficulties  resulting  from 
the  presence  of  asphaltum  in  Healdton  crude,  as  follows : « 

Q.  Now  did  you  test  the  Healdton  oil  for  asphaltum?— A.  No,  sir,  we  didn't 
separate  the  asphaltum,  but  it  is  very  small.  It  has  a  considerable  portion  of 
paraffine,  crystallizable  paraffine.  We  separated  out  some  nice  crystal  parafflne 
very  closely  resembling  the  Pennsylvania. 

Q.  You  don't  know  how  much  asphaltum? — ^A.  No,  sir. 

Q.  It  interferes  with  the  lubricants  if  it  is  in  considerable  quantities?— A. 
Yes,  sir,  though  the  California  oils  have  been  worked  for  lubricants  and  it  is 
very  fine. 

Q.  Profitably?- A.  Yes,  sir. 

The  testimony  of  Mr.  Williams  at  the  Corporation  Commission 
hearing  of  May  1  to  6,  when  cross-examined  by  counsel  for  the 
Magnolia  Pipe  Line  Co.  in  regard  to  this  subject,  was  as  follows :  ^ 

Q.  You  find,  I  notice,  quite  a  lot  of  asphalt  present?— A.  0.7  per  cent.     That 

Is  not  large. 

Q.  Well  do  you  know  whether  from  a  practical  standpoint  the  heavier  quali- 
ties of  this  oil  could  be  used  to  manufacture  lubricants  in  view  of  the  asphalt 
that  is  in  it?— A.  Well  I  don't  want  to  testify  on  that.  I  am  just  testifying  to 
that  analysis  and  the  correctness  of  it  and  what  there  is  there. 

A  similar  cross-examination  of  Mr.  Francis  brought  out  the  follow- 

0 

ing  testimony :  ^ 

Q.  Did  you  make  any  test  as  to  whether  or  not  lubricating  oils  could  be 
manufactured  from  this? — ^A.  Yes,  sir. 

Q.  What  was  your  test?— A.  Why  I  made  a  distillation  carrying  it  down 
together  and  obtained  a  certain  amount  of  lubricating  oil  having  the  properties 
of  lubricating  oil.    Tested  it  with  machinery,  upon  a  machine  I  have  there  at 

the  college. 
Q.  Well,  did  that  lubricating  oil  that  you  found  have  asphaltum  in  it?— 

A.  Yes 1  beg  your  pardon. 

Q.  I  mean  was  the  asphaltum  in  this  crude  oil? — A.  Yes,  sir. 

Q.  Do  you  know  what  difficulty  there  would  be  in  treating  it  to  make  lubri- 
cating oil  due  to  the  fact  that  there  is  asphaltum  in  it?— A.  Well  it  would  not 
be  as  practical  as  a  paraflhie  base  oil  to  make  lubricating  oil.  That  is,  it  could 
not  be  made  as  cheaply. 


•Transcript  of  Corporation  Commission  hearing,  p.  11. 
•Transcript  of  Corporation  Commission  hearing,  p.  90. 
•  Transcript  of  Corporation  Commission  hearing,  pp.  143-144. 


EEDUCTION  IN  CRUDE  OIL  PKICB. 


39 


i 


i 


In  discussing  with  an  agent  of  the  Bureau  of  Corporations  the 
barrel-still  tests  made  by  the  Sun  Co.  (see  Table  3,  p.  30),  J.  N. 
Pew,  president  of  the  Twin  State  Oil  Co.,  stated  that  although  the 
absence  of  cylinder  stock  was  a  drawback,  for  that  was  considered 
to  be  the  most  valuable  element  in  any  crude,  the  crude  did  contain 
a  substantial  proportion  of  other  lubricating  stock,  and  also  a  fair 
showing  of  low-grade  paraffine.  The  two  barrel-still  tests  referred 
to  do  not  show  definitely  what  kinds  and  quantities  of  commercial 
lubricants  could  be  manufactured  from  the  lubricating  stock. 

A  test  was  made  by  the  Oriental  Oil  Co.,  at  their  refinery  in 
November,  1914,  to  determine  the  lubricating  qualities  of  Healdton 
crude.  The  test  was  made  on  a  commercial  scale  with  24,951  gal- 
lons (594.1  barrels)  of  Healdton  crude  of  29°  B.  test,  but  it  was  not 
carried  out  to  the  point  of  securing  marketable  products  from  the 
lubricating  stock.    The  yield  obtained  was  as  follows : 


Per   cent. 

Benzine    9. 2 

Light  distillate 18-0 

Heavy  distillate 7.9 

Wax  distillate 29.2 


Per   cent. 
Fuel  oil 34.9 

Loss '^ 


Total  100.0 


The  "  wax  distillate,"  29.2  per  cent  of  the  volume  of  the  crude, 
was  the  lubricating  stock.  It  corresponds  with  the  "  paraffine  dis- 
tillate," shown  in  the  Magnolia  Petroleum  Co.'s  barrel-still  test 
(see  Exhibit  11,  p.  109)  and  would  require  similar  treatment  to  that 
accorded  the  "paraffine  distillate"  in  that  test  in  order  to  make 
commercial  engine  oils.  F.  M.  Smith,  vice  president  and  treasurer 
of  the  Oriental  Oil  Co.,  stated  that  he  did  not  consider  this  test 
fair  or  satisfactory,  and  that  he  was  confident  that  the  oil  tested 
was  not  fresh  oil  but  had  been  run  from  storage.  He  stated  further 
that  his  company  intended  to  make  a  thorough  test  for  lubricating 
oils,  and  that  he  was  confident  that  Healdton  crude  would  prove  to 
be  a  good  oil  for  the  manufacture  of  lubricants. 

Three  tests  have  been  made  by  the  Magnolia  Petroleum  Co.  to 
determine  the  nature  of  the  commercial  lubricants  which  it  is  pos- 
sible to  obtain  from  Healdton  crude.  The  information  in  regard 
to  the  first  test  was  given  in  E.  E.  Plumly's  testimony  at  the  Corpo- 
ration Commission  hearing  of  May  1  to  6.  He  stated  that  the  crude 
could  not  be  profitably  refined  for  lubricants.  Part  of  his  testi- 
mony is  as  follows :  <* 

Q  What  is  the  difficulty  in  the  way?— A.  Paraffin— or  asphalt  is  the  main 
thing  in  the  way  of  lubricants.  It  is  a  black  oil  and  in  order  to  make  a  cylin- 
der oil  out  of  it  you  have  got  to  treat  it.  We  treated  a  sample,  we  lost  25 
per  cent  in  the  treatment  and  we  treated  it  with  30  pounds  of  acid  to  the  barrel. 

Q.  Is  that  an  unusual  amount?— A.  A  very  unusual  amount,  and  we  lost  25 

•Transcript  of  Corporation  Commission  hearing,  pp.  258-259. 


40 


CONDITIONS  IN   THE  HEALDTON   OIL  FIELD, 


REDUCTION  IN   CRUDE   OIL  PRICE. 


41 


per  cent  of  our  crude  in  the  treatment  that  went  ofif  with  the  sludge  acid 
and  then  we  run  that  for  cylinder  oil  with  the  results  that  we  got  a  black 
sticky  mass  that  could  not  have  been  sold  anywhere  for  a  lubricant. 

Q.  Then,  as  I  understand  it,  the  loss  you  sustained  and  the  expense  of 
treating  it  and  the  character  of  article  you  get  all  make  it  prohibitive  to 
attempt  to  use  it. — ^A.  Certainly  would. 

He  also  testified  that  the  Magnolia  Petroleum  Co.  used  Electra 
oil  and  a  heavy  oil  from  Mexico  in  its  manufacture  of  lubricants, 
and  that  it  would  be  possible  to  use  Gushing  oil  for  that  purpose. 

Later,  in  the  month  of  July,  two  barrel-still  tests  were  made  at 
the  Beaumont  refinery  to  determine,  in  a  more  definite  manner,  the 
lubricant  quality  of  Healdton  crude.  The  descriptions  of  these 
tests  were  furnished  the  Bureau  of  Corporations.  (See  Exhibits 
10  and  11,  pp  107-110.) 

The  following  table  shows  a  comparison  of  the  results  from  the 
Oriental  Oil  Co.  refinery-run  test  with  the  barrel-still  tests  of  the 
Magnolia  Petroleum  Co.  and  the  Sun  Co.  Since  the  Oriental  Oil 
Co.  and  the  Sun  Co.  did  not  finish  up  merchantable  products,  the 
yield  for  the  Magnolia  Petroleum  Co.'s  test  is  stated  for  the  corre- 
sponding stage  in  the  process.  The  nomenclature  as  reported  has 
been  retained  and  corresponding  items  have  been  grouped  in  the 
table. 

Table  5.-C0MPARIS0N  OF  TESTS  MADE  TO  DETERMINE  THE  LUBRICATING  QUALT- 

TIES  OF  HEALDTON  CRUDE  OIL. 


Product. 


Benzine. . 
Naphtha. 
Gasoline. 


Light  distillate 

Heavy  distillate 

Light  end  common  oil . . 
Heavy  end  common  oil . 

Water-white  stock 

Kerosene 


Wax  distillate 

Parafflne  distillate 

Lubricating  stock , 

Nondescript  oil , 

Cylinder  oil 

a  Baum6  test.  29*. 


Oriental 
Oil  Co., 
refinery 
run. a  Vol- 
ume of 
crude. 


Per  cent. 
9.2 


7.9j 


29.2 


Magnolia  Petroleum 
Co.,  barrel-still  tests. *> 


Test  for 

engine  oils; 

volume 

of  crude. 


Per  cent. 


7.0 


2.51 
7.5 
15.0 


25.0 


30.0 


Test  for 
cylinder 
oils;  vol- 
ume of 
crude. 


Per  cent. 


13.3 


Sun  Co.,  barrel-still 
tests. c 


Steam-still 
test;  vol- 
ume of 
crude. 


Per  cent. 


12.0 


15.0 


b  Baum^  test,  30.6." 


350 
20.0 
20.0 

e  Baum^  test,  31.4*. 


Dry-heat 
test;  vol- 
ume of 
crude. 


Per  cent. 


10.0 
5.0 


15.0 


35.0 


/ 


i 


i 


Table  5.-C0MPARIS0N  OF  TESTS  MADE  TO  DETERMINE  THE  LUBRICATING  QUALI- 

TIES  OF  HEALDTON  CRUDE   OIL— Continued. 


Product. 


Fuel  oil 

Road  or  fuel  oil.. 

Gas  or  fuel  oil 

Gas  oil  distillate. 

Wax  tailings 

Coke 


Loss 


Total. 


Oriental 
Oil  Co., 
refinery 
run;  vol- 
ume of 
crude. 


Per  cent. 
34.9 


100.0 


Magnolia  Petroleum 
Co.,  barrel-still  tests. 


Test  for 

engine  oiLs; 

volume 

of  crude. 


Per  cent. 


27.5 
2.5 
4.7 


34.7 


2.8 


100.0 


Test  for 
cylinder 
oils;  vol- 
ume of 
crude. 


Per  cent. 


13.3 


33.4 


100.0 


Sun  Co.,  barrel-still 
tests. 


Steam-still 

test;  vol- 

imae  of 

crude. 


Per  cent. 


10.01     ^ 
^3.'.0 
2o.0j 


3.0 


100.0 


Dry-heat 
test;  vol- 
ume of 
crude. 


Per  cent. 


30.0 


5.0 


100.0 


In  the  foregoing  table  the  lubricating  stock  is  designated  by  vari- 
ous names,  but  these  have  been  grouped  so  as  to  afford  a  ready  com- 
parison. The  Oriental  Oil  Co.  refinery-run  test  and  the  Magnolia 
Petroleum  Co.'s  barrel-still  test  for  engine  oils  show  29.2  per  cent 
and  30.0  per  cent,  respectively — a  very  close  agreement. 

Attention  may  be  called  to  the  United  States  Bureau  of  Mines' 
average  of  20  tests  (see  Table  2,  p.  24)  made  with  the  laboratory 
distilling-flask  method,  which  show  results  in  rather  close  conform- 
ity with  these  two  tests.  For  the  sake  of  comparison,  the  yields 
shown  by  the  Bureau  of  Mines  are  repeated  here :  Gravity  of  crude, 
31.57°  B.;  gasoline,  7.0  per  cent;  kerosene,  30.7  per  cent;  lubricants, 
29.4  per  cent;  residuum  (including  loss),  32.9  per  cent.  The  two 
Sun  Co.  tests  show  lubricating  stock  amounting  to  35  per  cent  of 
the  volume  of  the  crude,  and  the  Magnolia  Petroleum  Co.  test  shows 
20  per  cent  for  the  cylinder  oil  and  also  20  per  cent  for  "nonde- 
script oil,"  which  apparently  should  be  classed  as  lubricating  stock. 

In  his  letter  of  August  19,  transmitting  the  results  of  the  barrel- 
still  tests  for  lubricants,"  Mr.  Greer,  the  general  attorney  of  the  Mag- 
nolia interests,  stated  in  regard  to  the  experiment  to  determine 
whether  or  not  cylinder  oils  can,  in  a  practical  way,  be  manufac- 
tured from  Healdton  crude  for  commercial  purposes : 

The  sum  and  substance  of  this  experiment  is  that  it  is  not  practical  to  use 
the  Healdton  crude,  rather  than  other  crudes,  to  manufacture  commercial 
cylinder  oils.  The  following  are  the  leading  obstacles  and  objections  in  the 
way: 

(a)  The  excessive  emulsification ; 

(6)  The  excessive  use  of  lye; 

(c)  The  excessive  amount  of  washing  necessary; 

(d)  The  great  loss  (33 J  per  cent)  in  the  treatment  of  this  oil. 


«  Exhibits  10  and  11,  pp.  107-110. 


42 


CONDITIONS  IN   THE  HEALDTON  OIL  FIELD. 


You  will  see  that  the  cylinder  oil  obtained  shows  a  prohibitive  Vis,  [viscosity] 
(411  at  212)  and  exhibits  a  color  and  api)earance  that  would  prevent  its  being 
a  success  on  the  marliet. 

The  following  table  has  been  prepared  to  show  a  comparison  of 
the  cost  and  value  of  products  of  Healdton  and  Electra  crudes,  when 
refined  to  obtain  engine  oils  at  the  Beaumont  refinery.  The  barrel-still 
test  yields  have  been  used  for  presenting  the  Healdton  crude  values 
in  the  absence  of  any  refinery  runs  carried  to  the  point  producing 
commercial  engine  oils,  and  the  yields  obtained  by  the  experience 
of  actual  refinery  runs  at  the  Beaumont  refinery  have  been  used  for 
presenting  the  Electra  crude  values.  A  regular  refinery  run  of  Heald- 
ton crude  to  make  engine  oils  might  show  slightly  different  yields 
from  the  barrel  test.  The  difference  would  probably  be,  however, 
in  decreasing  the  proportion  of  lubricants  finished  up,  rather  than 
increasing  it. 

Table  6.— COMPARISON   OF  THE  VALUES  OF  THE  PRODUCTS  OF  HEALDTON  AND 
ELECTRA  CRUDE  OIL  WHEN  REFINED  TO  PRODUCE  ENGINE  OILS. 


Product. 

Healdton  crade,  barrel-still  test.o 

Electra  crude,  refinery  runs  at  Beau- 
mont refinery.  6 

Volume 
of  crude. 

Gallons. 

Price  per 
gallon. 

Amount. 

Volume 
of  crude. 

Gallons. 

Price  per 
gallon. 

Amount 

Naphtha 

Per  cent. 
7.50 

25.00 

12.32 

.81 

3.15 

10.50 

5.17 

.34 

Cents. 
6.62 

5.01 

4.50 

4.50 

$0.20853 
.52605 
.23265 
.01530 

Per  cent. 
27.00 

30.00 

21.23 

n.34 

12.60 

8.92 

Cents. 
6.62 

5.01 

4.50 

$0.75071 
.63126 
.40140 

Refined  oil 

Gas  oil 

Foots  oil 

118/120  M.  P.  wax.... 

.23 
.55 

c.lO 
e.23 

«i3.27 
d3.32 

.02060 
.04847 

124/126M.  P.  wax.... 

128  M.  P.  wax 

.47 
12.30 
4.10 
27.50 
2.50 
4.72 
2.78 

/.20 
6.17 
1.72 

11.55 
LOS 

PL  98 
L17 

d3.32 
5.75 
6.21 
L88 
L88 
d.25 

.04150 
.29728 
.10681 
.21714 
.01974 
.03008 

Pale  oil 

6.12 
5.39 

2.57 
2.26 

5.75 
6.21 

.14778 
.14035 

Red  oil 

Fuel  oil 

Wax  tailings 

Coke 

6.00 
3.48 

*2.52 
L46 

d.25 

.04585 

Loss 

Total 

100.00 

42.00 

1. 70108 

100.00 

42.00 

2  18642 

o  Baum^  test,  30.6°. 
6  Baum6  test,  40-41  •. 
c  Equals  0.63  pounds. 
d  Price  per  poimd. 


e  Equals  1.46  pounds. 
f  Equals  1.25  pounds. 
g  Equals  14.43  pounds. 
»  Equals  18.34  pounds. 


In  the  above  table  the  price  used  for  naphtha  is  an  average  of  the 
gasoline  and  engine  naphtha  prices  taken  from  sales  on  an  f.  o.  b.  re- 
finery basis,  for  the  Beaumont  refinery,  April  to  September,  1914. 
The  prices  of  refined  oil,  finished  (M.  P.)  w^ax,  pale  oil,  and  red  oil, 
respectively,  are  averages  of  the  prices  taken  from  sales,  on  an  f .  o.  b. 
refinery  basis  for  the  Beaumont  refinery,  for  the  same  period.  The 
prices  used  for  gas  oil  and  for  fuel  oil,  respectively,  are  computed 


i 


A 


( 
> 


REDUCTION  IN  CRUDE   OIL  PRICE. 


43 


on  sales  April  to  September,  1914,  f.  o.  b.  Corsicana  refinery  basis, 
no  such  prices  being  obtained  from  the  Beaumont  refinery  records. 
No  prices  of  sales  of  foots  oil  and  of  wax  tailings  were  obtained, 
but  as  the  foots  oil'  obtained  in  refining  Electra  is  run  into  gas 
oil,  and  the  wax  tailings  into  fuel  oil,  the  prices  of  those  products 
were  used,  respectively.  The  price  for  coke  was  taken  from  a  state- 
ment showing  prices  in  April.  The  gas-oil  distillate  obtained  on  the 
first  distillation  in  the  Healdton  crude  test  had  so  much  sulphur  that 
a  further  treatment  would  be  needed  to  make  it  commercial  gas  oil. 
It  has,  therefore,  been  considered  at  a  fuel-oil  price.  The  total  value 
of  the  lubricants — that  is,  the  pale  oil,  red  oil,  and  wax,  obtained 
from  a  barrel  of  Healdton  crude — is  shown  in  the  above  table  to  be 
$0.44559,  and  from  a  barrel  of  Electra  to  be  $0.35720.  It  is  evident 
that  Healdton  crude  has  lubricant  qualities  for  the  manufacture  of 
engine  oils.  The  question  is,  therefore,  one  of  the  practicability  of 
its  use  for  this  purpose,  in  competition  with  the  other  crudes  also 
available  to  the  refinery. 

In  reference  to  the  experiment  made  for  the  purpose  of  seeing  if 
engine  oils  can  be  manufactured  from  Healdton  crude,  Mr.  Greer  in 
his  letter  of  August  19  stated: 

This  experiment  does  show  that  very  good  engine  oils  can  be  made  from  the 
Healdton  crude,  but  it  is  not  practical  to  use  it  for  this  purpose,  and  this  cir- 
cumstance does  not  add  to  its  value  for  two  reasons: 

(o)  In  order  to  obtain  the  paraffine  distillate  from  which  the  engine  oils  are 
manufactured  you  have  to  cut  out  the  naphtha,  the  refined  oil  and  the  gas  oil. 
You  get  a  small  percentage  of  naphtha  and  refined  oil  and  the  gas  oil  obtained 
can  not  be  used  commercially  as  gas  oil  because  of  the  excessive  amount  of 
sulphur  present,  which  would  necessitate  re-running  it  into  fuel  oil. 

(6)  Engine  oil  can  be  manufactured  from  practically  all  crudes,  and  there  are 
so  many  other  crudes  better  adapted  to  the  manufacture  of  engine  oils  than  the 
Healdton  crude  that  no  one  would  ever  choose  Healdton  crude  for  this  puri)ose 
if  he  had  these  other  crudes  better  suited,  from  which  to  select.  In  other  words, 
no  value  is  added  to  the  Healdton  crude  by  reason  of  the  fact  that  you  can 
make  engine  oil  from  it,  because  of  the  circumstances  above  stated. 

According  to  the  estimates  "  furnished  the  Bureau  by  the  Magnolia 
Petroleum  Co.,  the  cost  of  gathering,  storage,  and  evaporation  in  the 
Electra  field  is  20  cents  per  barrel,  and  cost  of  pipage  from  Electra 
to  Beaumont  is  30  cents.  To  this  must  be  added  the  cost  of  the  crude 
at  the  wells,  the  price  of  which  on  September  21  w^as  65  cents.  The 
cost  of  the  Electra  crude,  f.  o.  b.  Beaumont  refinery,  was,  therefore, 
on  September  21,  $1.15  per  barrel.  The  cost  of  Healdton  crude  at 
the  Texas  State  line  was  70  cents,  the  price  paid  by  the  Magnolia 
Petroleum  Co.  to  the  Magnolia  Pipe  Line  Co.  The  distances  from 
both  fields  to  Beaumont  are  substantially  the  same. 

"  These  estimates  were  furnished  to  the  Bureau,  and  while  the  Bureau  has  not,  for  the 
purposes  of  this  report,  determined  for  itself  from  an  examination  of  the  books  of  the 
company  the  various  costs,  it  is  of  the  opinion  that  for  use  in  the  above  comparison  of 
Healdton  and  Electra  crudes,  the  estimates  are  sufficiently  accurate. 


44 


CONDITIONS  IN  THE  HEALDTON  OIL  FIELD. 


According  to  the  estimate  ^  furnished  the  Bureau  by  the  Magnolia 
Petroleum  Co.,  the  cost  of  pipage  to  Beaumont  is  25  cents.  The  cost 
of  the  Healdton  crude  f.  o.  b.,  Beaumont  refinery  was,  therefore,  95 
cents  per  barrel.  It  may  be  noted  that  the  Magnolia  Petroleum  Co. 
in  its  estimate  for  cost  of  transporting  crude  to  Beaumont,  admits 
that  the  cost  is  5  cents  more  for  the  Electra  than  for  the  Healdton 
crude.  The  estimate  °  of  the  Magnolia  Petroleum  Co.,  furnished  the 
Bureau  for  the  cost  of  refining,  not  including  overhead  expense,  de- 
preciation, interest,  or  extraordinary  expenses,  was  $0.1677  per  barrel 
both  for  Healdton  and  for  Electra  crudes.  According  to  an  estimate* 
furnished  the  Bureau  by  the  Magnolia  Petroleum  Co.  (see  p.  Ill), the 
cost  of  removing  the  sulphur  from  the  refined  oil  and  naphtha  was 
$0.003793  per  gallon.  Applying  this  estimate  to  the  3.15  gallons  of 
naphtha  and  10.50  gallons  of  refined  oil  obtained  from  the  Healdton 
crude  in  the  barrel-still  test,  the  cost  of  desulphurizing  would  be 
$0.0518,  which  should  be  added  to  the  cost  of  refining  Healdton  crude. 
The  following  table  shows  a  comparison  of  the  relative  cost  in  using 
the  two  crudes : 


Cost. 


Crude  f.  o.  b.  Beaumont  refinery 

Refining  (exclusive  of  overhead  expense,  etc.) 
Desulphurizing  naphtha  and  refined  oil 

Total 


Healdton 

crude, 
per  barrel. 


$0.90 
.1677 
.0518 


11.1195 


Electra 

crude, 

per  barrel. 


$1.15 
.1677 


$1.3177 


A  deduction  of  the  above  total  cost  of  buying,  transporting,  and 
refining  a  barrel  of  Healdton  crude  from  the  total  value  of  its 
products  when  refined  for  engine  oils,  as  shown  in  Table  6,  leaves  a 
profit  of  $0.58158  per  barrel  ($1.70108-$1.1195=$0.58158).  A  simi- 
lar computation  for  the  Electra  crude  shows  a  profit  of  $0.8G872 
($2.18642-$1.3177=$0.86872).  This  gives  a  difference  in  favor  of 
Electra  of  $0.28714. 

On  the  basis  of  the  prices  used  in  Table  6,  which  in  general  are 
averages  of  sales  made  in  the  six  montlis'  period,  April  to  September, 
1914,  inclusive,  the  foregoing  computations  show  that  when  the  price 
of  Electra  crude  at  the  wells  was  35  cents  higher  than  that  of  Heald- 
ton, as  it  was  from  March  26  to  May  5,  there  was  a  greater  profit 
by  $0.08714  a  barrel  in  refining  Electra  crude  for  engine  oils  than 
Healdton  crude.     From  May  5  to  September  30  the  difference  in  the 

«  These  estimates  were  furnished  to  the  Bureau,  and  while  the  Bureau  has  not,  for  the 
purposes  of  this  report,  determined  for  itself  from  an  examination  of  the  books  of  the 
company  the  various  costs,  it  Is  of  the  opinion  that  for  use  in  the  above  comparison  of 
Healdton  and  Electra  crudes,  the  estimates  are  sufficiently  accurate. 


*  ♦ 


y 


^ 


A 


V 


REDUCTION  IN   CRUDE   OIL  PRICE. 


45 


prices  of  the  two  crudes  at  the  wells  has  been  25  cents  or  less,  making 
it  more  profitable  to  use  Electra  crude  for  the  manufacture  of  engine 
oils,  as  shown  above. 

Section  5.  The  presence  of  sulphur  in  Healdton  crude  oil. 

The  commercial  significance  of  the  presence  of  sulphur  in  the 
Healdton  crude  is  a  matter  of  dispute.  It  is  maintained  by  some 
experts  who  have  made  tests  on  the  oil  that  the  sulphur  present  could 
easily  and  inexpensively  be  removed  in  the  process  of  refining.  On 
the  other  hand,  it  is  the  contention  of  the  Magnolia  Petroleum  Co., 
which  has  refined  large  quantities  of  Healdton  crude,  that  the  sul- 
phur is  present  in  a  fixed  form,  which  requires  more  expensive 
processes  for  its  removal  to  bring  the  products  within  commercial 
specifications  than  is  the  case  w4th  other  competitive  crudes,  and 
that  because  of  this  fact  it  is  expedient  to  remove  only  enough  of 
the  lighter  products  to  bring  the  residue  down  to  the  required 
"  flash  "  test  and  sell  it  for  fuel  oil. 

The  earliest  mention  of  the  presence  of  sulphur  in  the  Healdton 
oil  which  the  Bureau  of  Corporations  has  found  is  in  the  report 
of  H.  L.  Wood  to  the  Oklahoma  Corporation  Commission  on  March 
13.<*    In  this  report  Mr.  Wood  said: 

There  is  very  perceptible  sulphur  odor  noticeable  over  the  field,  like  the 
heavy  crudes  produced  in  Texas,  Louisiana,  Mexico  and  California — the  so- 
called  fuel  oils  of  commerce,  a  few  of  the  wells  showing  lighter  gravities  give 
off  a  sweet  odor  lilie  most  of  the  regular  refining  crudes. 

Statements  of  those  who  maintain  that  the  sulphur  is  easily  re- 
movable are  as  follows : 

Irving  C.  Allen,  petroleum  chemist  of  the  United  States  Bureau 
of  Mines,  testified  before  the  Oklahoma  Corporation  Commission  on 
June  9, 1914,  in  regard  to  various  analyses  made  of  Oklahoma  crude- 
oils  by  the  Bureau  of  Mines.  In  reply  to  a  question  as  to  whether 
0.7  of  1  per  cent,  which  he  stated  he  had  found  in  his  analyses  of  20 
samples  of  Healdton  crude,  was  an  excessive  amount  of  sulphur, 
he  answered :  * 

No,  sir  it  is  not.  I  think  this  sulphur  can  be  removed  very  satisfactorily 
in  the  ordinary  commercial  stills  of  commerce. 

C.  D.  Webster,  an  oil  refiner  of  considerable  experience,  testified 
at  the  Corporation  Commission  hearing  of  May  1  to  6  on  the  sub- 
ject of  the  refining  quality  of  Healdton  oil.  At  that  time  Mr. 
Webster  had  made  no  test  himself  of  the  Healdton  crude,  but  based 
his  opinions  on  the  laboratory  analyses  which  had  been  submitted  to 

«  See  Exhibit  2,  p.  94. 

*  Transcript  of  Corporation  Commission  hearing,  p.  6. 


46 


CONDITIONS  IN   THE  HEALDTON   OIL  FIELD. 


REDUCTION  IN   CRUDE   OIL  PRICE. 


47 


the  commission.  When  questioned  as  to  what  he  meant  by  his  state- 
ment that  he  didn't  think  the  presence  of  sulphur  in  such  amounts  as 
were  shown  by  the  analyses  ought  to  make  very  much  depression 
commercially  in  the  price  of  the  crude  oil,  he  answered :  <* 

The  price  [cost]  of  eliminating  that  oil— the  sulphur  doesn't  remain  in  the 
kerosene  or  in  the  gasoline.  Those  are  the  two  that  they  get  the  value  out  of. 
Now  what  remains  in  the  fuel  oil  that  doesn't  make  any  difference. 

Q.  It  smells  bad  enough  any  way? — A.  Yes  sir,  it  is  just  a  matter  of  smell. 

A  refinery  run  was  made  on  May  12  and  13  at  C.  D.  Webster's 
refinery  at  Coalton,  Okla.,  to  test  the  refining  qualities  of  the  Heald- 
ton  crude,  on  which  occasion  1,972.6  gallons  (46.97  barrels)  were  run 
through  the  still.  (See  Table  4,  p.  36.)  This  run  was  given  the 
personal  supervision  of  Guy  Y.  Williams,  of  the  department  of  chem- 
istry, University  of  Oklahoma,  and  C.  D.  Webster.  In  his  report  of 
June  1,  1914,  to  Governor  Cruce,  Mr.  Williams  stated  in  reference  to 
sulphur : 

The  naphtha  fraction  gave  slight  tests  for  sulphur;  the  kerosene  fraction 
showed  stronger  tests  for  sulphur.  From  the  chemical  standpoint  I  see  no 
reason  why  this  oil  cannot  be  treated  so  as  to  remove  the  sulphur  from  the  first 
two  fractions,  if  their  removal  is  necessary.  This  can  be  done  by  either  the 
"  Litharge  process  "  or  the  "  Frasch  process." 

Mr.  Webster  furnished  the  Bureau  of  Corporations  with  a  copy  of 
his  report  to  Wirt  Franklin,  president  of  the  Crystal  Oil  Co.,  con- 
cerning this  same  run.    In  regard  to  sulphur  he  stated  : 

The  sulphur  in  the  oil  was  a  little  more  than  we  are  getting  out  of  the 
Schulter  oil  but  not  enough  to  interfere  with  its  refining  and  we  used  only  the 
same  methods  as  we  are  using  on  all  of  our  crude  oils  from  this  field. 

At  the  Corporation  Commission  hearing  of  May  1  to  6,  Mr.  Wil- 
liams testified  that  he  had  made  four  tests  of  the  Healdton  crude  oil 
for  sulphur,  and  found  0.66  per  cent,  0.55  per  cent,  0.72  per  cent,  and 
0.73  per  cent,  respectively,  making  an  average  of  0.66  per  cent. 
Charles  K.  Francis,  chief  chemist  of  the  Oklahoma  Agricultural  and 
Mechanical  College  at  Stillwater,  Okla.,  testified  that  he  had  tested 
the  Healdton  crude  oil  for  sulphur  and  found  "  practically  0.77  of  1 
per  cent."  Both  Messrs.  Williams  and  Francis  stated  that  they  had 
not  tested  for  sulphur  content  the  naphtha  or  illuminating  oil 
obtained  in  their  laboratory  distillation  of  the  crude.* 

The  proportion  of  sulphur  existing  in  Healdton  crude,  as  found  by 
the  foregoing  experts,  is  in  close  correspondence  with  that  claimed 
by  the  Magnolia  Petroleum  Co.,  as  a  result  of  their  own  tests.  Since 
Messrs.  Francis  and  Williams  did  not  make  a  sulphur  test  of  the 
products  obtained  by  their  laboratory  distillation,  and  Messrs.  Wil- 

•  Transcript  of  Corporation  Commission  hearing,  p.  117. 

•Transcript  of  Corporation  Commission  hearing,  pp.  87,  88,  113  ,132,  133,  143. 


•  ff 


/ 


-I 


.1 


liams  and  Webster  did  not  state  in  their  reports  on  the  refinery  run 
the  exact  proportions  of  sulphur  obtained  in  the  naphtha,  kerosene, 
and  residue,  there  are  no  definite  figures  to  compare  with  those 
secured  from  the  Magnolia  Petroleum  Co. 

In  discussing  with  an  agent  of  the  Bureau  of  Corporations  the 
result  of  two  barrel-still  tests  made  by  the  Sun  Co.  (see  Table  3, 
p.  30),  J.  N.  Pew,  jr.,  president  of  the  Twin  State  Oil  Co.,  stated  that 
Healdton  crude  contains  from  one-half  of  1  per  cent  to  1  per  cent  of 
sulphur,  but  that  this,  however,  could  not  affect  the  value  of  the  oil 
to  more  than  1  cent  per  barrel  at  the  most. 

When  questioned  by  an  agent  of  the  Bureau  in  regard  to  the  dif- 
ficulty in  removing  sulphur  from  the  refined  products  of  Healdton 
crude,  L.  Mooney,  superintendent  of  the  Pierce-Fordyce  Oil  Asso- 
ciation's Fort  Worth  refinery,  stated  that  a  somewhat  larger  amount 
of  chemicals  is  required  in  the  treatment  of  Healdton  distillate  than 
for  Electra  or  Cushing  distillate.  He  further  said  that  the  removal 
of  the  sulphur  from  the  Healdton  crude  is  not  a  serious  problem 
for  a  refiner.  The  increased  cost  due  to  the  use  of  more  chemicals 
is  not  great. 

On  the  other  hand,  the  contention  that  the  sulphur  is  not  easily 
removable  is  strongly  insisted  on  by  representatives  of  the  Magnolia 
interests.  At  the  Corporation  Commission  hearing  on  May  1  to  6, 
E.  E.  Plumly,  manager  of  the  refinery  department  of  the  Magnolia 
Petroleum  Co.,  testified  as  to  the  reason  why  the  first  test  did  not 
reveal  the  presence  of  sulphur  in  such  form  as  to  affect  the  value  of 
the  crude.     He  said :  ° 

The  reason  we  didn't  find  the  sulphur  in  this  first  test  was  due  to  the  fact 
that  all  Texas  and  Oklahoma  oils  we  had  come  in  contact  with  before  had 
showed  such  a  small  per  cent  of  sulphur  that  it  was  not  in  our  way  and  that 
was  the  reason  this  sulphur  test  was  not  made  on  this  first  sample. 

In  describing  the  circumstances  concerning  the  discovery  of  the 
sulphur  difficulty  he  testified  that  the  second  sample  of  Healdton 
oil  was  received  on  March  14,  and  was  at  once  tested  on  a  one-barrel 
still.  The  company  had  at  that  time  inquiries  for  a  British  Ad- 
miralty oil  and  wished  to  find  out  whether  the  residuum  from  Heald- 
ton, after  taking  out  the  light  product,  would  answer  the  purpose. 
The  sulphur  test  for  certain  of  the  British  Admiralty  specifications 
permits  the  presence  of  sulphur  up  to  0.75  of  1  per  cent.  The  test  of 
the  Healdton  residuum  showed  a  sulphur  content  of  about  0.92  of  1 
per  cent.  Tests  for  sulphur  were  thereupon  made  on  the  crude  oil; 
also  on  the  lighter  products.  The  crude  showed  0.66  of  1  per  cent, 
the  naphtha  0.041  of  1  per  cent,  and  the  illuminating  oil  0.196  of  1  per 
cent.    The  commercial  specifications  for  naphtha  permit  only  0.01  of 

•  Transcript  of  Corporation  Commission  hearing,  p.  255. 


48 


CONDITIONS  IN   THE   HEALDTON   OIL  FIELD. 


EEDUOTION  IN  CRUDE  OIL  PRICE. 


49 


h 


I 


1  per  cent,  0.04  of  1  per  cent  for  water- white  oil  (first-grade  kerosene) , 
and  0.06  of  1  per  cent  for  common  oil  (second-grade  kerosene).  Mr. 
Plumly  testified,  in  regard  to  the  difficulty  of  removing  the  sulphur, 
as  follows :  ** 

A.  We  found  it  very  difficult  to  remove ;  the  sulphur  is  of  a  fixed  nature  dif- 
ferent from  other  sulphur  oils  that  are  found  in  south  Texas.  The  sulphur 
on  the  south  Texas  oils  will  pass  off  in  the  gas,  but  the  sulphur  on  this  oil  will 
not  pass  off  in  the  gas  and  we  have  found  a  way  to  remove  it  on  a  trial  by 
treating  the  distillates  with  ten  pounds  of  sulphuric  acid  and  taking  them  all 
back  for  re-distillation  and  treating  the  products  distilled  off  the  second  time 
with  a  second  10  pounds  of  sulphuric  acid  we  barely  got  the  refined  oils  down 
to  a  point  where  thoy  would  just  meet  the  specifications. 

Q.  Is  the  process  in  removing  this  sulphur  from  the  lighter  product  more 
expensive  than  the  process  you  have  to  resort  to  in  the  use  of  the  Electra  and 
the  Gushing  and  other  light  oils  obtainable?— A.  Yes,  sir,  it  is  very  much  more. 

Q.  While  you  can  remove  it  the  process  of  doing  so  is  more  expensive?— 
A.  It  is  about  double  the  cost. 

A  letter,  dated  March  23,  from  E.  E.  Plumly  to  E.  R.  Brown,  the 
general  manager  of  the  Magnolia  Petroleum  Co.,  was  put  in  the 
record  of  the  Corporation  Commission  hearing  (defendant's  Exhibit 
No.  5).  It  shows  the  result  of  the  test  and  the  importance  attached 
by  Mr.  Plumly  to  the  character  of  the  sulphur.  (See  Exhibit  5, 
p.  100.)  Telegrams  which  passed  between  Mr.  Brown  and  H.  C. 
Fol<^er,  jr.,  of  New  York,  who,  with  John  D.  Archbold,  at  that  time 
owned  about  70  per  cent  of  the  stock  of  the  Magnolia  Petroleum 
Co.  and  also  of  the  Magnolia  Pipe  Line  Co.,  indicate  the  importance 
attached  by  them  to  the  matter.  (See  Exhibit  6,  p.  102.)  On  the 
basis  of  their  claim  that  the  sulphur  found  in  the  Healdton  crude  is 
of  such  a  nature  as  to  be  difficult  of  elimination  in  refining,  the  Mag- 
nolia Pipe  Line  Co.,  on  March  26,  reduced  the  price  of  oil  of  32°  and 
over  from  $1.05  to  $0.70,  making  the  same  price  for  all  oil  from  the 
Healdton  field  regardless  of  gravity  test.* 

At  the  request  of  the  Bureau,  E.  E.  Plumly,  manager  of  the  re- 
finery department  of  the  Magnolia  Petroleum  Co.,  prepared  a  state- 
ment showing  the  cost  of  desulphurizing  the  naphtha  and  refined 
oil  obtained  from  Healdton  crude  in  order  to  bring  them  to  com- 
mercial specifications.*'  He  estimated  the  cost  of  desulphurizing  to 
be  $0.003793  per  gallon  of  refined  oil  and  naphtha.  On  the  basis 
of  the  yields  obtained  by  the  Corsicana  refinery  in  refining  886,254 
barrels  from  April  to  September,  1914,  inclusive,  the  cost  per  barrel 
would  be  $0.0475  per  barrel  of  crude  (12.516,  the  number  of  gallons 
of  naphtha,  gasoline,  and  kerosene,  multiplied  by  $0.003793  equals 

«  Transcript  of  Corporation  Commission  hearing,  pp.  257-258. 

6E.  R.  Brown  In  his  affidavit  (see  Exhibit  5,  p.  100)  also  referred  to  the  low  average 
gravity  of  the  crude  as  one  of  the  reasons  for  this  action.  The  Bureau's  examination  of 
the  statements  made  publicly  at  the  time  of  reduction  show  that  the  chief  reason  pot 
forward  by  the  pipe  line  company  was  the  presence  of  sulphur. 

«  See  Kxhlbit  12,  p.  111. 


A 


^  $0.0475).  In  a  letter  to  the  Bureau  concerning  this  statement,  Mr. 
Plumly  pointed  out  that,  with  one  exception  all  of  the  basic  figures 
used  in  his  statement  were  derived  directly  from  the  regular  monthly 
yield  and  cost  statements  of  the  refinery.  Concerning  the  one  ex- 
ception, he  wrote: 

The  estimated  cost  of  handling  the  917,190  gallons  of  refined  oil  pumped  to 
Beaumont,  re-run  and  treated  again,  was  obtained  from  costs  of  re-running  and 
treating  lilie  amounts  of  refined  oil,  but  on  account  of  mixing  other  oils  with 
the  refined  oil  re-run  and  not  keeping  the  finished  products  separate,  we  have 
nothing  on  our  regular  records  to  show  this  cost. 

The  foregoing  evidence  shows  that  the  expense  of  desulphurizing 
the  naphtha,  gasoline,  and  kerosene  derived  from  Healdton  crude, 
together  with  the  impracticability  of  obtaining  gas  oil  from  this 
crude  and  the  fact  that  the  fuel  oil  contains  a  relatively  high  per  cent 
of  sulphur  in  comparison  with  that  from  crude  from  other  fields, 
would  not,  of  itself,  affect  the  value  of  Healdton  crude  by  more  than  5 
cents  a  barrel.  While  the  difference  of  35  cents  in  the  price  per  bar- 
rel between  Healdton  and  the  other  crudes,  which  was  made  on  March 
26,  may  have  been  justified  by  other  reasons,  it  certainly  was  not  jus- 
tified primarily  because  of  the  sulphur  content  of  the  Healdton 
crude. 

Section  6.  Comparative  value  of  products  of  Healdton  and  other  Okla- 
homa crude  oils. 

Results  of  United  States  Bureau  of  Mixes'  analyses. — As  al- 
ready stated,  the  tests  of  the  different  crude  oils  obtained  by  the  Bu- 
reau of  Mines  were  made  by  a  standard  method.  The  object  was  to 
determine  what  products  could  be  obtained  from  the  crude  without 
destructive  distillation,  i.  e.,  without  decomposition  of  the  oil  in  any 
way.    (Seep.  28.) 

J  In  the  following  table  the  prices  are  based  upon  the  f .  o.  b.  re- 

finery prices  of  the  Magnolia  Petroleum  Co.,  which  were  verified  by 
agents  of  the  Bureau.  The  naphtha  prices  are  an  average  of  the 
gasoline  and  engine  naphtha  prices  taken  from  sales  on  an  f.  o.  b. 
refinery  basis  for  the  Beaumont  refinery,  April  to  September,  1914. 
The  prices  for  kerosene  are  an  average  for  the  six  months,  April  to 

.  (  September,  1914,  inclusive,  April,  May,  and  September  being  Corsicana 
prices  and  June,  July,  and  August,  Beaumont  prices.  The  fuel-oil 
prices  are  an  average  of  prices  f.  o.  b.  refinery  at  Corsicana,  Tex., 
based  upon  contracts  of  April,  May,  June,  and  July,  1914,  for  present 
and  future  delivery.  In  the  absence  of  any  actual  prices  on  unfin- 
ished lubricating  distillate,  the  price  used  in  computing  values  on  this 

^  product  is  an  estimated  value,  being  slightly  more  than  one-half  a 

cent  per  gallon  higher  than  the  price  of  fuel  oil.    Whatever  varia- 

76568'— 15 1 


1 


50 


CONDITIONS  IN   THE  HEALDTON   OIL  FIELD. 


EEDUCTION  IN  CKUDE  OIL  PRICE 


61 


)  < 


i\ 


tion  from  the  actual  values  this  might  result  in,  it  is  so  small  as  to  be 
negligible.  It  should  be  borne  in  mind  that  the  figures  for  the  first 
three  yield  statements,  which  are  based  upon  the  tests  made  by  the 
United  States  Bureau  of  Mines,  represent  only  what  mi<rht  be  ex- 
pected from  the  products  resulting  from  the  first  process  of  distilla- 
tion. There  would  be  some  change  in  the  quantity  and  quality  of 
commercial  products  finished  from  the  first  distillates,  but  probably 
It  would  be  so  slight  as  not  to  affect  the  validity  of  the  ficrures  for 
purposes  of  comparison  with  each  other.  *^ 

'^t'^i^l"^^**^'^^^'^^^^    ^^^^^    ^^    PRODUCTS   OF   HEALDTON    AVER\rF   oitt  a 
HOMA    AND     CUSmNQ    CRUDE    OILS.    BASED     UPON    LABORATORY  ^^^^ 

CRUDE VLr"""    ""^'^'    ^^^"^^    ^"    ^^^^^  (I    B\RKE\"U"42^LtLONrol 


Crude  oil  and  product. 

Gravity. 

Per  cent 
yield. 

Gallons. 

Price  per 
gallon. 

Amount. 

Healdton  crude:a 

Naphtha 

Beg.  B. 

57.7 
42.2 
29.9 

6.0 
28.8 
29.7 
34.4 

1.1 

2.520 

12.096 

12.474 

14.448 

.462 

$0.06621 
.04796 
.02500 
.  01875 

Kerosene 

SO.  16685 

Lubricants 

.58012 

Residue,  fuel  oil 

.31185 

Loss 

.27090 

1  otai 

Average  Oklahoma  crude:* 

Naphtha 

59.6 
42.2 

rg.i 

100.0 

8.1 
38.5 
26.1 
26.5 

.8 

42.000 

3.402 
16. 170 
10.962 
11.130 

.336 

.06621 
.04796 
.02500 
.01875 

1.32972 

Kerosene 

.22525 

Lubricants 

.77551 

Residue,  fuel  oil 

.  274a5 

Loss 

.20869 

Total 

100.0 

42,000 

! 

1.48350 

Gushing  crude:  e 

Naphtha 

58.5 
42.3 
29.5 

25.8 
32.0 
23.2 
17.5 
1.5 

10.836 
13.440 

9.744 

7.350 
.630    . 

.06621 
.04796 
.02500 
.01875 

Kerosene 

.71745 

Lubricants 

.64458 

Residue,  fuel  oil 

.24360 

Loss 

. 13781 

Total 

100.0 

42.000   . 

L  74344 

«  Composite  of  6  samples  of  Cushing  deep-sand  crude;  gravity  of  erode,  40.94-  B. 

It  will  be  seen  by  the  foregoing  table  that  the  value  of  the  products 
from  a  barrel  of  Healdton  crude,  according  to  the  yields  shown  by 
the  Bureau  of  Mines'  tests,  was  $0.15378  below  that  from  the  average 
Oklahoma  crude,  and  $0.41372  below  that  from  Cushing  crude  Ex 
pressed  m  percentages,  the  value  of  Healdton  crude,  judged  by  the 
value  of  Its  products,  would  be  90  per  cent  of  that  of  average  Okla- 
homa crude  and  76  per  cent  of  that  of  Cushing  crude 


1     •>••• 


/ 


k\ 


I 


The  difference  in  the  value  of  the  products  is  accounted  for  largely 
by  the  difference  in  the  gravity  of  the  crude  oils.  In  this  respect  the 
influence  of  the  high-grade  Cushing  crude  is  especially  noticeable,  the 
proportion  of  naphtha  being  more  than  three  times  larger  than  for 
the  average  Oklahoma  crude  and  more  than  four  times  greater  than 
for  the  Healdton  crude.  From  the  results  based  upon  the  analysis  of 
the  United  States  Bureau  of  Mines  it  is  quite  clear  that  the  Healdton 
crude  is  less  valuable  than  either  the  average  Oklahoma  or  the  Cush- 
ing crudes.  At  the  hearing  before  the  Oklahoma  Corporation  Com- 
mission June  9,  1914,  Irving  C.  Allen,  petroleum  chemist  of  the 
United  States  Bureau  of  Mines,  was  questioned  concerning  the  rela- 
tive value  of  Cushing,  average  Oklahoma,  and  Healdton  crude  oils, 
as  compared  with  the  best  Pennsylvania  crude  oil,  in  the  following 
manner :  *» 

Q.  I  believe  you  stated  in  the  beginning  that  in  your  judgment  from  such 
investigations  you  have  made  that  the  deep  sand  oil  in  the  Cushing  field  was 
in  value  90  per  cent  of  the  Pennsylvania  high-grade  oil  and  that  the  Healdtou 
oil  was  90  per  cent  of  the  value  of  the  average  oil  of  Oklahoma.  Now  in  this 
average  oil  of  Oklahoma,  did  that  Include  the  Healdton  field  or  the  deep  sand 
field  oil? — A.  No,  sir.  I  can  state  very  briefly:  The  Pennsylvania  oil  is  value 
100  per  cent,  Bartlesville  sand  90  per  cent,  Oklahoma  in  general  85  per  cent 
and  Healdton  75  per  cent. 

Q.  That  would  make  the  Healdton  field,  as  compared  with  Pennsylvania  75 
per  cent. — ^A.  75  per  cent  of  the  Pennsylvania. 

Q.  And  90  per  cent  of  the  value  of  the  average  Oklahoma  oil? — ^A.  No,  Okla- 
homa oil  is  about  85,  15  per  cent  less  than  the  Pennsylvania. 

Q.  Yes,  I  understand  it  is  15  per  cent  less  than  the  Pennsylvania  and  the 
Healdton  oil  would  be  10  per  cent  less  than  the  average  Oklahoma  oil. — A.  Yes, 
sir.  There  should  not  be  a  greater  difference  than  25  per  cent  in  the  value  of 
the  Healdton  and  Pennsylvania.    That  is  at  the  well,  of  course. 

Q.  Now  then  the  Bartlesville  sand  oil  alone,  what  would  you  say  is  the 
difference  between  that  and  the  Pennsylvania  oil? — A.  About  10  i^er  cent. 

Q.  That  would  be  100,  90,  85  and  75?— A.  Yes,  "ir. 

Results  from  refinery  runs. — The  Bureau,  in  the  following  table, 
presents  a  statement  of  the  comparative  value  of  various  Okla- 
homa, north  Texas,  and  north  Louisiana  crudes.  The  yields  shown 
were  obtained  in  actual  refinery  runs  made  for  commercial  pur- 
poses, and  the  prices  used  are  the  same  as  those  in  the  foregoing 
table.  As  has  been  already  pointed  out,  it  is  possible,  by  various 
changes  in  the  processes,  for  the  refinery  to  vary,  within  certain 
limits,  the  character  and  proportions  of  the  refined  products  from  a 
given  crude,  and,  for  this  reason,  a  direct  comparison  of  refinery 
runs,  where  the  markets  supplied  are  different,  does  not  afford  a 
final  definite  means  for  exact  judgment  of  the  commercial  values 
of  different  crudes.  (See  p.  32.)  Since  the  runs  made  at  refineries 
located  in  Oklahoma  and  Kansas  were  made  with  reference  to  market 
conditions  for  refined  \)roducts  differing  in  some  particulars  from 

•Transcript  of  Corporation  Commission  hearing,  pp.  13-14. 


Hi.      J 


iJ! 


52 


CONDITIONS  IN   THE  HEALDTON   OIL  FIELD. 


the  conditions  in  Texas,  that  fact  should  be  taken  into  consideration. 
For  example,  recently  fuel  oil  has  commanded  a  lower  price  f .  o.  b. 
refinery  in  Oklahoma  than  f.  o.  b.  refinery  in  northern  Texas,  the 
region  where  the  bulk  of  the  Healdton  crude  is  marketed.  It  is 
possible  that,  had  the  price  of  fuel  oil  been  higher  in  Oklahoma,  a 
greater  proportion  of  the  crude  would  have  been  run  to  that  prod- 
uct. Notwithstanding  the  fact  that  this  table  does  not  furnish  the 
means  for  arriving  at  a  judgment,  theoretically  exact,  of  the  com- 
mercial values  of  the  different  crudes,  based  on  the  value  of  the 
products  obtainable  from  them,  it  does,  however,  present  an  approxi- 
mately correct  statement.  The  table  shows  near  enough  for  practi- 
cal purposes  the  commercial  refinery  possibilities  of  the  different 
crudes. 

Tables.— COMPARATIVE  VALUE  OF  HEALDTON, GUSHING,  GLENN  POOL,  AND  AVER- 
AGE OKLAHOMA,  LIGHT  CORSICANA,  AND  ELECTRA  (TEX.),  AND  MANSFIELD  (LA.) 
CRUDE  OILS,  AS  DETERMINED  BY  REGULAR  REFINERY  OPERATIONS  (BASED 
UPON  1  BARREL  OF  42  GALLONS  OF  CRUDE). 


Crude  oil  and  product. 


Healdton  crude: 

Gasoline 

Engine  naphtha . 

Kerosene 

Fuel  oil 

Loss 


Run. 


Total. 


Healdton-Cushing  crude: 

Gasoline 

Engine  naphtha 

Kerosene 

Fuel  oil 

Loss 


Total. 


Light  CorsJcana  crude: 

Gasoline 

Kerosene 

Gas  oil 

Fuel  oil 

Loss 


Total. 


Electra  crude: 
Gasoline.. 
Kerosene. 
Gas  oil... 
Fuel  oil . . 
Loss 


ol 


Per  cent 
yield. 


5.32 

2.86 
2L64 
68.66 

1.52 


100.00 


Gallons. 


2.23 
1.20 
9.09 

28.84 
.64 


42.00 


Price  per 
gallon. 


10.07081 
.05766 
.04796 
.01875 


62 


8.62 

L88 

9.67 

79.39 

.44 


100.00 


o3 


18.00 
34.57 
14.01 
31.42 
2.00 


3.62 
.79 

4.06 

33.34 

.19 


42.00 


7.56 
14.52 

5.88 

13.20 

.84 


100.00 


o4 


Total. 


27.06 
27.91 
14.53 
28.50 
2.00 


100.00 


42.00 


.07081 
.05766 
.04796 
. 01875 


Amount. 


SO.  15791 
.06919 
.43596 
.54075 


L2  381 


.25633 
.  01555 
.  19172 
,62513 


1. 12173 


. 07081 
.047% 
,04500 
.01875 


.53532 
. 69638 
.2W60 
.24750 


1.74380 


11.37 

11.  72 

6.10 

11. '7 

.84 


42.00 


. 07081 
.04790 
.(M.500 
.01875 


.80511 
,56209 
,27450 
,22444 


1.86614 


a  Yields  shown  by  refinery  runs  at  the  Corsicana  refinery  of  the  Magnolia  Peti  oleum  Co. 

*  Yields  shown  by  refinery  runs  at  the  Fort  Worth  refinery  of  the  Pierce-Fordyce  Oil  Association. 


#% 


.♦ 


BEDUCTION  IN   CRUDE   OIL  PRICE. 


53 


Table  8.— COMPARATIVE  VALUE  OF  HEALDTON,  GUSHING,  GLENN  POOL,  AND  AVER- 
AGE OKLAHOMA,  LIGHT  CORSICANA,  AND  ELECTRA  (TEX.),  AND  MANSFIELD  (LA.) 
CRUDE  OILS,  AS  DETERMINED  BY  REGULAR  REFINERY  OPERATIONS  (BASED 
UPON  1  BARREL  OF  42  GALLONS  OF  CRUDE)— Continued. 


Crude  oil  and  product. 

Rim. 

Per  cent 
yield. 

Gallons. 

Price  per 
gallon. 

Amount. 

Electra  crude: 

Gasoline 

a5 

[       22.89 

2.81 

25.87 

9.33 

36.77 

[         2.33 

9.01 
L18 

10.87 
3.92 

15.44 
.98 

$0.07081 
.05766 
.(V1796 
.04500 
.01875 

J0.&S048 

'     Engine  naphtha 

Kerosene 

.52133 
.17640 
.28950 

Gas  oil 

Fuel  oil 

Loss 

Total 

100.00 

42.00 

1    TtriTii 

Mansfield  crude: 

Gasoline 

be 

10.00 
55.  CO 
20.00 
13.00 
2.00 

4.20 

23.10 

8.40 

5.46 

.84 

.07081 
.04796 
.04500 
.01875 

.29740 

1. 107S8 

.37800 

.10238 

Kerosene 

Gas  oil 

Fuel  oil 

Loss 

Total 

100.00 

42.00 

L&S.566 

Glenn  pool  crude: 

Gasoline 

c7 

17.69 

17.28 

60.64 

4.39 

7.43 

7.26 

25.47 

1.84 

.07081 
.04796 
. 01S75 

.52612 
.34819 
.47756 

Kerosene 

Fuel  oil 

Loss 

Total 

100.00 

42.00 

1  a.=iis7 

Gushing  crude: 

Gasoline 

c8 

30.90 
25.00 
15.00 
27.00 
2.10 

12.98 

10.50 

6.30 

n.34 

.88 

.07081 
.04796 
.04500 
.01875 

.91911 
.50358 
.28350 
.21263 

Kerosene 

Gas  oil 

Fuel  oil 

Loss 

Total 

100.00 

42.00 

1  91.8fi2 

Average  Oklahoma  crude: 

Gasoline 

c9 

19.52 
18.13 

2.41 
58.33 

L61 

8.20 

7.61 

LOl 

24.50 

.68 

.07081 
.04796 
.(M.500 
.01875 

.58064 
.36498 
.04^5 
.45938 

Kerosene 

Gas  oil 

Fuel  oil 

L<KSS 

Total 

100.00 

42.00 

1.45045 

a  Yields  shown  by  refinery  rims  at  the  Fort  Worth  refinery  of  the  Pierce-Fordyce  Oil  Association. 
b  Yields  shown  by  refinery  runs  at  the  Beaumont  refinery  of  the  Magnolia  Petroleum  Co. 
c  Yields  shown  by  refinery  runs  at  refineries  located  in  Oklahoma  and  Kansas. 


54 


CONDITIONS  IN   THE   HEALDTON   OIL  FIELD. 


REDUCTION  IN  CRUDE  OIL  PRICE. 


55 


\  !■ 


|i 


The  average  prices  per  gallon  in  the  preceding  table  are  the  same 
as  those  shown  in  Table  7  (p.  50),  except  that  the  gasoline  prices  are 
an  average  of  the  f.  o.  b.  refinery,  Beaumont,  Tex.,  for  April  to  Sep- 
tember, 1914,  inclusive.  The  engine  naphtha  prices  are  an  average 
f.  o.  b.  for  the  same  plant  for  May  to  September,  1914,  inclusive. 
The  gas-oil  prices  are  based  upon  the  only  price  data  available, 
namely,  for  May  and  August,  1914,  f.  o.  b.  Corsicana,  Tex. 

The  foregoing  comparison  of  the  value  of  the  products  of  the 
different  crude  oils,  on  a  percentage  basis,  shows  that  the  total  value 
of  the  products  from  a  barrel  of  Healdton  crude  (No.  1)  is  G9  per 
cent  of  light  Corsicana  crude  (No.  3) ;  65  per  cent  of  Electra  crude, 
as  refined  by  the  Magnolia  Petroleum  Co.  (No.  4),  and  G9  per  cent, 
as  refined  by  the  Pierce-Fordyce  Oil  Association  (No.  5) ;  64  per 
cent  of  Mansfield  crude;  89  per  cent  of  Glenn  pool  crude;  63  per 
cent  of  Cushing  crude ;  and  83  per  cent  of  average  Oklahoma  crude 
(including  some  Cushing  crude).  Since  the  run  of  Healdton-Cush- 
ing  crude  by  the  Pierce-Fordyce  Oil  Association  (No.  2)  is  not  to  be 
considered  typical  of  results  that  would  be  obtained  under  normal 
refining  conditions,  no  comparison  with  them  is  made.     (See  p.  35.) 

Attention  should  be  called  to  the  fact  that  comparisons  based  on 
Tables  7  and  8,  are  on  the  total  market  value  of  the  products  obtain- 
able from  the  same  quantities  of  the  different  crudes.  They  do  not 
represent  the  relative  profit  which  the  refinery  obtains  by  refining 
the  different  crudes.  The  relative  profit  depends  not  only  on  the 
relative  yields  to  be  obtained  from  different  crudes,  refined  for  a 
common  market,  but  also  on  the  relative  costs,  f .  o.  b.  refinery  basis, 
of  these  crudes  as  well  as  the  relative  cost  of  refining  them.  The 
margin  shown  after  the  deduction  of  these  relative  costs  from  the 
total  value  of  the  derived  products,  does  indicate  the  relative  profit 
to  the  refinery  from  the  use  of  one  crude  as  compared  with  another. 

In  the  absence  of  any  satisfactory  determination  of  the  cost  of 
transportation  of  crude  oil  from  the  wells  to  the  refinery  and  of  the 
relative  cost  of  refining,  the  Bureau  does  not  attempt  to  state  defi- 
nitely the  actual  profit  to  be  derived  from  refining  the  various 
crudes.  The  crude  oil  prices,  shown  in  Table  9,  on  page  55,  are 
those  paid  at  the  wells,  and  do  not  represent  prices  of  crude  oil 
delivered  at  the  refinery. 

Section  7.  Comparison  of  cnide-oil  prices  in  the  Mid-Continent  field  for 
March  to  September,  1914,  inclusive. 

The  follow^ing  table  gives  a  comparison  of  the  price  paid  for  the 
crude  oil  produced  in  different  parts  of  what  is  known  as  the  Mid 
Continent  oil  field,  which  embraces  Kansas,  Oklahoma,  northern 
Texas,  and  northern  Louisiana.    It  will  be  noted  that  on  March  1, 


-4 


1914,  except  in  the  case  of  Healdton  crude,  which  was  $1.03,  the 
posted  price  of  all  the  other  crudes  was  the  same  ($1.05).  Following 
the  cut  in  the  price  of  Healdton  crude  on  March  26,  there  was  a 
marked  decline  in  the  price  paid  for  all  the  other  crudes,  excepting 
the  Caddo  crude. 

Table  9.— PRICE  OF  DIFFERENT  KINDS  OF  MID-CONTINENT  CRUDE  OIL  AT  WELLS, 
MAR.  1,  1914,  TO  SEPT.  30,  1914  (PER  BARREL  OF  42  GALLONS). 

[Prices  from  the  Oil  and  Gas  Journal.] 


Date. 


March  1 

March  2 

March  9 

March  26 

Aprils 

April  10 

April  13 

AprUlS 

April  20...... 

April  27 

April  30 

Mays 

July9 

Augusts 

August  13 

September  1.. 
September  12. 
September  21. 
September  22. 
September  30. 


Healdton, 
Okla. 

All  other 
Okla- 
homa 

crude.o 

Electra, 
Tex.o 

Light 
Corsi- 
cana, 
Tex. 

C$1.03 

SL05 

$L05 

$1.05 

d  .7O-«L03 

L05 

L05 

L05 

d  .70- el.  05 

1.05 

1.05 

1.05 

O.70 

1.05 

1.05 

1.05 

•.70 

1.00 

L05 

1.05 

«.70 

.95 

L05 

L05 

«.60 

.90 

.95 

.95 

a.  60 

.85 

.95 

.95 

O.50 

.85 

.85 

.85 

O.50 

.80 

.85 

.85 

O.50 

.75 

.85 

.85 

«.50 

.75 

.75 

.75 

O.50 

.75 

.75 

.75 

a.  50 
O.50 
O.50 
O.50 
0.50 

.75 
.75 
.75 
.65 
.55 

.75 
.75 
.75 
.75 

.75 

.75 
.75 
.75 
.75 
.75 

0,50 

.55 

.65 

.65 

O.50 

.55 

.05 

.65 

Light 

Caddo, 

La.6 


$L05 

LOS 

LOS 

LOS 

LOS 

LOS 

LOS 

LOS 

LOS 

LOS 

LOS 

LOS 

LOO 

.95 

.85 

.80 

.80 

.80 

.80 

.80 


•  Regardless  of  gravity. 

fc  In  the  absence  of  quotations  on  Mansfield  crude,  the  price  of  Caddo,  La.,  crude  above  38°  gravity, 
which  is  the  same  as  paid  for  Mansfield  crude,  is  used  in  this  table, 
e  This  is  the  price  posted  by  the  Magnolia  Pipe  Line  Co.  on  January  26.    (See  p.  10.) 
i  For  crude  tmder  32°  gravity, 
e  For  crude  32°  gravity  and  above. 

From  the  foregoing  table  it  will  be  seen  that  in  the  period  March 
1  to  September  30,  1914,  the  decline  in  the  prices  of  crude  oil  at  the 
wells  w^as  general  in  the  Mid-Continent  field  (including  northern 
Texas  and  Louisiana),  but  the  decline  was  not  uniform  for  the  dif- 
ferent crudes.  In  the  case  of  Healdton  crude  the  decline  from  $1.05 
to  50  cents  per  barrel  took  place  in  about  a  month  and  a  half,  while 
in  the  case  of  the  other  crudes  the  reduction  in  price  was  much  more 


gradual. 


r  I 


56 


CONDITIONS  IN  THE  HEALDTON  OIL  FIELD. 


1 


!  i 
11 


Section  8.  Comparison  of  the  prices  of  refined  products  with  that  of 
Healdton  crude  oil. 

The  Senate  resolution  calls  for  information  as  to  "  whether  corre- 
sponding changes  have  been  made  in  the  prices  of  the  finished  prod- 
ucts manufactured  from  such  oil." 

At  the  time  the  resolution  was  passed  none  of  the  Healdton  crude 
oil  had  been  refined  on  a  commercial  scale,  and  consequently  there 
were  no  finished  products  to  sell.     Since  the  latter  part  of  April, 
however,  a  large  quantity  of  Healdton  crude  has  been  refined  and 
the  finished  product  sold.    Comparison  of  f.  o.  b.  refinery  prices  for 
the  markets  supplied  by  the  Magnolia   Petroleum  Co.,  however, 
shows  that,  excepting  for  gasoline  and  fuel  oil,  immediately  follow- 
ing the  reduction  in  the  price  of  Healdton  crude  from  $1.05  to  $0.70 
per  barrel  there  was  no  perceptible  reduction  in  the  price  of  finished 
products.    Between  April  and  September,  1914,  the  price  of  gasoline 
at  the  Magnolia  Petroleum  Co.'s  Beaumont  refinery  declined  $0.0218 
per  gallon,  or  24  per  cent,  and  the  price  of  fuel  oil  f.  o.  b.  Corsicana 
fell  off  $0.45  per  barrel,  or  40  per  cent.    On  the  other  hand,  the  price 
of  kerosene  at  the  Corsicana  refinery  advanced  $0.0086  per  gallon. 
This  was  equivalent  to  about  20  per  cent.     The  reduction  in  the  price 
of  Healdton  crude  from  $1.05  to  $0.50  per  barrel,  which  price  has  been 
effective  since  April  20, 1914,  was  equivalent  to  52  per  cent. 

It  should  be  pointed  out  in  this  connection  that  the  market  prices 
of  the  finished  products  from  crude  oil  at  any  particular  time  are 
determined  by  several  factors,  one  of  which  is  the  price  of  crude  oil 
at  the  wells.     The  other  factors  deal  with  other  elements  of  supply 
such  as  transportation  of  the  crude,  refining,  and  marketing  costs  and 
the  possibility  of  competition  through  use  of  substitutes  or  supplies 
from  other  sources,  and  of  demand,  such  as  the  consumption  require- 
nients  of  the  available  market.     Furthermore,  since  similar  products, 
though  in  different  proportions,  can  be  finished  from  most  crude  oils 
the  decrease  m  price  of  the  crude  from  one  field,  which  at  that  time 
furnished  only  a  relatively  small  proportion  of  the  total  crude  oil 
consumed  by  the  refineries  which  supplied  the  north  Texas  market, 
would  not  be  likely  to  influence  to  a  perceptible  extent  the  market 
prices  of  the  finished  products. 

Theoretically,  a  reduction  in  the  price  of  the  crude  oil  would,  other 
thmgs  being  equal,  bring  about  some  reduction  in  the  prices  of  the 
finished  products.  The  reduction  in  the  price  of  crude  must,  how- 
ever, m  order  to  bring  about  such  a  reduction  in  the  prices  of  prod- 
ucts, aflect  a  considerable  proportion  of  the  crude  which  is  refined 


REDUCTION  IN  CRUDE  OIL  PRICE. 


57 


A 


>■ 


Section  9.  The  Bureau  of  Corporations'  conclusion  relative  to  the  cause  of 
the  price  reductions. 

After  an  examination  of  all  the  evidence  on  the  subject  that  it 
has  been  able  to  secure,  the  conclusion  of  the  Bureau  is  that  the 
Magnolia  Pipe  Line  Co.  from  January  26,  1914,  when  it  began  to 
buy  and  run  oil  into  its  pipe-line  system,  in  the  Healdton  field,  up 
to  November,  1914,  had  a  monopoly  of  the  only  practical  means  of 
transporting  the  oil  from  the  field  to  a  refinery  market.  It  did  not 
transport  any  oil  as  a  common  carrier.  The  lack  of  marketing  facili- 
ties and  the  charges  for  transportation  were  such  that  the  producers 
preferred  to  sell  their  oil  at  the  wells  to  the  pipe  line  company,  and 
no  oil  was  offered  for  transportation. 

The  pipe  line  company  bought  all  the  oil  entering  its  pipe  line, 
stored  it,  transported  it  to  the  boundary  line  between  Oklahoma  and 
Texas,  and  sold  it  to  the  Magnolia  Petroleum  Co.,  an  allied  concern. 
The  Magnolia  Pipe  Line  Co.,  by  virtue  of  the  circumstances  which 
made  it  the  only  purchaser,  as  well  as  transporter  of  the  oil  pro- 
duced in  the  field,  in  fixing  the  price  which  it  would  pay  for  the 
oil,  at  the  same  time  fixed  the  market  price  for  the  oil  produced  in 
the  field. 

With  respect  to  the  cause  of  the  reductions  in  the  price  fixed  by 
the  Magnolia  Pipe  Line  Co.,  the  Bureau  finds  no  evidence  of  an 
intent  to  arbitrarily  depress  land  values  in  order  to  buy  oil-producing 
property  more  cheaply,  or  to  acquire  stocks  of  oil  already  accumu- 
lated at  a  price  much  below  its  real  value.  It  is  true  that  officials  of 
the  Magnolia  Petroleum  Co.  early  in  the  development  of  the  Healdton 
field  made  exceedingly  favorable  statements  in  regard  to  the  refining 
quality  of  the  oil,  and  said  it  was  a  high-grade  oil.  They  assert  that 
this  was  a  bona  fide  mistake,  and  the  evidence  of  the  correspondence 
in  tl.e  files  of  the  Magnolia  Pipe  Line  Co.  and  the  Magnolia  Petro- 
leum Co.  as  well  as  their  actions  support  this  contention.  When  they 
discovered  that  only  a  relatively  small  proportion  of  gasoline  and 
kerosene  could  be  obtained  from  it,  that  the  oil  did  not  have  enouf'h 
lubricating  value  to  make  it  practicable  for  them  to  use  it  for  the 
manufacture  of  lubricants,  and  that  it  had  a  relatively  high  percent- 
age of  fixed  sulphur,  to  remove  which  increased  the  cost  of  refining, 
the  Magnolia  Pipe  Line  Co.  made  the  various  reductions  in  price. 
This  was  done,  they  claim,  in  order  to  put  the  f.  o.  b.  refinery  cost  of 
the  crude  oil  from  the  Healdton  field  on  a  competitive  basis  with  the 
similar  cost  of  the  crudes  from  other  fields  that  were  available  to  the 
Magnolia  Petroleum  Co.'s  refineries. 

The  Bureau  of  Corporations  finds  that  the  contention  of  the  pipe 
line  company  regarding  the  small  gasoline  and  kerosene  content  of 


!:      I 


l|i:    il 


68 


COKDITIONS  IN   THE   HEALDTON   OIL  FIELD. 


the  crude  oil  produced  in  the  Healdton  field  is  correct.  It  is  of  the 
opinion  also  that  while  Healdton  crude  is  chemically  adapted  to  the 
manufacture  of  lubricants  yet  in  view  of  the  prices  at  which  other 
crudes  better  adapted  to  the  manufacture  of  lubricants  could  be 
bought,  and  the  limited  market  for  the  lubricants  obtainable  from 
Healdton  crude,  its  lubricant  qualities  added  little  to  its  market  value. 
The  fixed  sulphur  which  is  in  the  Healdton  crude  is  removable  from 
the  gasoline  and  kerosene  by  methods  which  are  not  unduly  expen- 
sive, although  more  expensive  than  is  necessary  for  other  competing 
crudes.  The  sulphur,  however,  does  not  affect  the  value  of  the 
Healdton  crude  enough  to  justify  any  important  reduction  in  the 
price  paid  for  the  oil.  In  brief,  the  conclusions  of  the  Bureau  are 
that  the  reductions  in  the  price  of  Healdton  crude  oil  were  made 
because  of  the  discovery  by  the  Magnolia  Pipe  Line  Co.  of  its  small 
gasoline  and  kerosene  content,  and  because  the  lubricating  values  of 
this  crude  were  not  enough  to  warrant,  under  existing  conditions,  its 
use  for  the  manufacture  of  lubricants. 

The  pipe  line  company,  however,  does  not  appear  to  be  without 
blame  for  its  failure  to  determine  the  true  character  of  the  oil  at 
an  early  date.  This  would  have  saved  much  disappointment  to  pro- 
ducers. 

In  regard  to  the  question  raised  in  the  Senate  resolution  whether 
changes  were  made  in  the  prices  of  the  finished  products  manufac- 
tured from  Healdton  crude  oil  corresponding  to  the  changes  in  the 
price  of  the  crude,  it  should  be  noted  that  no  finished  products  from 
Healdton  crude  oil  were  marketed  until  about  the  latter  part  of  April, 
1914,  at  which  time  all  of  the  reductions  in  price  had  taken  place. 


-i 


.1 


CHAPTEE  III. 

CHARGES  AGAINST  THE  MAGNOLIA  PIPE  LINE  CO.  IN  REGARD  TO 

DISCRIMINATION. 

Section  1.  The  legal  aspects  of  discrimination. 

The  language  of  the  resolution  on  the  subject  of  discriminations 
is  as  follows  : 

Whether  discriminations  are  practiced  on  the  part  of  said  company  as  be- 
tween different  producers  of  oil  in  the  above  mentioned  field,  and  especially  as 
to  whether  any  discrimination  is  practiced  against  the  oil  produced  on  Indian 
allotments. 

Before  the  evidence  bearing  on  this  subject  is  considered,  it  is 
desirable  to  examine  the  Oklahoma  law,  popularly  known  as  the 
Yeager-Strain  Act,  and  also  the  circumstances  which  led  to  the 
necessity,  on  the  part  of  the  pipe  line  company,  of  prorating  its  runs 
from  the  producers  in  the  Healdton  field,  because  of  its  inability  to 
take  the  entire  daily  production. 

The  Yeager-Strain  Act,  approved  March  27,  1909,  is  set  forth  in 
sections  4304-4318  of  the  Revised  Laws  of  Oklahoma,  1910,  chapter 
53,  Article  II,  pages  1111-1114.  The  title  of  the  original  act  is  as 
follows : 

AN  ACT  to  regulate  all  corporations,  associations  and  persons  engaged,  in 
this  State,  in  the  business  of  carrying  crude  petroleum,  or  its  products,  through 
pipe  lines;  to  regulate  operators  of  oil  wells  and  refiners  of  crude  petroleum 
and  its  products,  regulating  the  purchasing  of  mineral  oil  by  pipe  lines,  provid- 
ing punishments  for  violations  thereof,  and  declaring  an  emergency. 

The  first  section  defines  the  different  forms  of  business  to  which 
the  act  applies;  the  second  and  third  sections  confer  powers  of 
acquiring  rights  of  way,  under  certain  conditions ;  the  fourth,  fifth, 
and  sixth  sections  deal  with  the  duties  as  common  purchasers  and 
common  carriers;  the  next  five  sections  deal  with  the  formalities 
which  must  be  complied  with  in  order  that  the  privileges  conferred 
under  the  act  may  be  enjoyed.  The  remaining  sections  deal  with  the 
enforcement  of  the  act  and  the  penalties  that  may  be  imposed  for  its 
violation. 

The  sections  in  regard  to  the  duties  of  common  purchasers,  common 
carriers,  and  penalties,  are  as  follows : 

4307.  Common  purchasers  of  oil— required  to  purchase.  Every  corporation 
joint  stock  company,  partnership  or  other  person,  claiming  or  exercising  the  ri-ht 
to  carry  or  transport  crude  oil  or  petroleum  or  any  of  the  products  thereof,  by  pipe 

59 


ilH 


I 


60 


CONDITIONS  IN  THE  HEALDTON   OIL  FIELD. 


line,  for  hire,  or  otherwise,  witliin  the  limits  of  this  State,  as  allowed  by,  and  upon 
compliance  with  the  requirements  of  this  article,  as  owner,  lessee,  licensee,  or  by 
virtue  of  any  other  right  or  claim,  which  is  engaged  in  the  business  of  purchas- 
ing crude  oil  or  petroleum  therein,  shall  be  deemed  a  common  purchaser  thereof, 
and  shall  purchase  all  of  the  petroleum  in  the  vicinity  of,  or  which  may  be 
reasonably  reached  by  its  pipe  lines,  or  gathering  branches,  without  discrimina- 
tion in  favor  of  one  producer  or  one  person  as  against  another,  and  shall  fully 
perform  all  the  duties  of  a  common  purchaser;  but  if  it  shall  be  unable  to 
perform  the  same,  or  shall  be  legally  excusable  from  purchasing  and  transport- 
ing all  of  the  petroleum  produced,  then  it  shall  purchase  and  transport  petroleum 
from  each  person  and  producer  ratably,  in  proportion  to  the  average  daily  pro- 
duction; and  such  common  purchasers  are  hereby  expressly  prohibited  from 
discriminating  in  price  or  amount  for  like  grades  of  oil,  or  facilities  as  between 
producers  or  persons;  and  in  the  event  such  purchaser  is  likewise  a  producer, 
it  is  hereby  prohibited  from  discriminating  in  favor  of  its  own  production,  or 
storage,  or  production  or  storage  in  which  it  may  be  interested  directly  or  indi- 
rectly in  whole  or  in  part,  and  its  own  production  and  storage  shall  be  treated 
as  that  of  any  other  person  or  producer. 

4308.  Same— exceptions.  All  persons,  firms,  associations,  and  corporations 
are  exempt  from  the  provisions  of  this  article  where  the  nature  and  extent  of 
their  business  are  such  that  the  public  needs  no  use  in  the  same,  and  the  conduct 
of  the  same  is  not  a  matter  of  public  consequence;  and  for  this  purpose  the 
district  courts  of  the  State  and  the  corporation  commission  are  vested  with 
jurisdiction  to  determine  such  exemptions  in  any  action  or  proceeding  properly 
before  them,  as  provided  in  this  article. 

4309.  Oil  carriers  are  common  carriers— discrimination  prohibited.  Every  cor- 
poration, joint  stock  company,  partnership  or  person  engaged  in  the  business  of 
carrying  or  transporting  crude  oil  or  petroleum  or  any  of  the  products  thereof  for 
hire  or  otherwise,  by  pipe  line,  within  this  State,  and  by  virtue  of  and  in  conform- 
ity to  any  valid  law  incapable  of  revocation  by  any  law  of  this  State  or  of  the 
United  States,  or  by  virtue  of  and  in  conformity  to  the  provisions  of  this  article, 
shall  be  deemed  a  common  carrier  thereof  as  at  common  law;  and  no  such  com- 
mon carrier  shall  allow  or  be  guilty  of  any  unjust  or  unlawful  discrimination, 
directly  or  indirectly,  in  favor  of  the  carriage,  transportation,  storage  or  deliv- 
ery of  any  crude,  stock  or  storage  oil,  or  any  product  thereof,  in  its  possession 
or  control,  or  in  which  it  may  be  interested,  directly  or  indirectly. 

4315.  Penalty  for  violations.  Any  person,  co-partnership,  or  corporation,  its 
agent  or  employee,  violating  any  of  the  provisions  of  this  article,  or  any  order 
of  the  comi^etent  courts  of  this  State,  or  the  corporation  commission,  pursuant 
to  the  jurisdiction  conferred  by  this  article,  shall,  upon  conviction  thereof,  be 
fined  a  sum  of  not  less  than  one  thousand  dollars,  nor  more  than  five  thousand 
dollars,  or  imprisonment  for  not  less  than  six  months,  nor  more  than  one  year, 
or  by  both  such  fine  and  imprisonment  for  each  and  every  violation  of  this 
article;  but  in  case  the  monthly  runs  or  takings  or  transportation  of  oil  shall 
average  so  as  to  be  without  discrimination,  as  herein  provided,  the  transactions 
of  any  particular  day,  week,  or  portion  of  a  month  shall  be  disregarded;  and 
the  con)petent  court  of  the  county  in  which  the  omission  or  commission,  which  is 
a  violation  of  this  article  has  occurred  shall  have  jurisdiction  of  an  action 
under  the  penal  code  for  the  punishment  thereof;  and  said  penalties  shall  not 
be  exclusive  of  civil  liability. 

4816.  Suspension  of  penalty,  when.  Whenever  the  operation  of  a  valid  order 
of  a  competent  court  or  the  corporation  commission  is  duly  susi)ended,  according 
to  law,  the  puniUve  provisions  of  this  article  shall  likewise  be  suspended  in  their 
operation  as  to  the  transactions  adjudicated  in  said  court;  and,  further,  any 


/ 


^ 


Jb 


>- 


DISCRIMINATION  CHARGES. 


61 


court  having  jurisdiction  of  an  action  brought  by  the  State  to  punish  for  a 
violation  under  the  terms  of  this  article,  shall  not  impose  a  punishment  therefor 
greater  than  five  hundred  dollars  against  any  person  or  corporation,  if  it  finds 
from  the  evidence  that  the  violation  was  made  solely  with  the  object  of  testing 
according  to  law  the  validity  of  any  of  the  provisions  of  this  article,  or  of  the 
order  of  any  competent  court  or  of  the  corporation  commission,  in  any  pro- 
ceeding to  carry  out  the  provisions  hereof. 

The  Magnolia  Pipe  Line  Co.,  up  to  November,  1914,  had  not  trans- 
ported any  oil  from  the  field,  in  its  character  of  common  carrier, 
because,  as  stated  by  the  general  counsel  of  the  company,  the  pro- 
ducers made  no  demand  for  the  transportation  of  oil,  and  further- 
more, because  if  they  had  succeeded  in  working  up  a  market  for  the 
crude  the  pipe  line  and  railroad  charges  to  their  nearest  available 
market  were  such  that  they  could  not  realize  as  much  from  the  sale 
of  their  oil  as  the  Magnolia  Pipe  Line  Co.  would  pay  them  for  it  at 
Healdton.  Therefore,  only  the  sections  relating  to  the  duties  of  a 
common  purchaser  and  to  the  penalties  for  violation  of  the  act  have 
thus  far  had  much  bearing  on  the  situation. 

Under  the  law,  the  common  purchaser  must  purchase  all  of  the 
petroleum  which  may  be  reasonably  reached  by  its  pipe  lines,  or  gath- 
ering branches,  without  discrimination  in  favor  of  one  producer  as 
against  another,  and  it  is  further  provided  that  if  unable  to  perform 
all  the  duties  of  a  common  purchaser  or  if  legally  excusable  from 
purchasing  and  transporting  all  of  the  petroleum  produced,  then  the 
common  purchaser  shall  make  his  purchases  from  each  producer 
"  ratably,  in  proportion  to  the  average  daily  production,"  and  is  pro- 
hibited from  discriminating  in  price  or  quantity  run  for  like  grades 
of  oil,  or  in  facilities  as  between  producers. 

It  should  be  noted  that  while  on  conviction  of  a  violation  of  the 
act,  by  discrimination  between  producers,  the  pipe  line  company  is 
heavily  penalized,  it  is  provided  that  in  case  the  monthly  runs  shall 
average  so  as  to  be  without  discrimination,  the  transactions  of  any 
particular  day,  week  or  portion  of  a  month  shall  be  disregarded. 
Evidently  this  provision  was  inserted  because  it  is  not  practicable  to 
run  the  pro  rata  of  every  producer  each  day,  which  in  many  cases 
might  amount  to  only  a  few  barrels.  It  is  preferable  to  empty  a 
whole  tank  at  one  time. 

During  the  study  of  the  question  of  discrimination  raised  by  the 
Senate  resolution  it  became  evident,  from  the  different  interpreta- 
tions placed  on  the  Yeager-Strain  Law  by  various  interested  parties, 
that  the  actions  constituting  discrimination  needed  clearer  definition.' 
The  following  are  some  of  the  questions  raised  concerning  which  up 
to  this  time  there  has  been  no  judicial  determination : 

1.  Does  a  pipe  line  have  to  purchase,  or  take  proportionately  from 
each  producer  or  lease,  oil  already  held  in  storage  before  the  pipe 
line  began  to  act  as  a  common  purchaser  in  a  given  field  ? 


^ 


62 


CONDITIONS  IN  THE  HEALDTON  OIL  FIELD. 


m 


i 


2.  Does  a  pipe  line  at  a  time  when  it  is  purchasing  the  entire  pro- 
duction of  the  field  have  to  purchase  more  oil  than  the  current  pro- 
duction of  that  field  during  the  period  in  which  it  is  acting  as  a  com- 
mon purchaser,  even  though  it  is  running  less  oil  than  its  normal 
daily  capacity? 

3.  Does  the  fact  that  a  pipe  line  company  does  not  establish  a  pro 
rata  system  of  purchasing  oil  in  the  field  until  a  certain  date  in  any 
way  relieve  it  from  liability  for  discrimination  in  its  purchases  from 
different  producers  or  leases,  between  the  time  it  began  to  be  a  com- 
mon purchaser  in  the  field  and  the  date  on  which  it  established  a 
prorating  system? 

4.  When  wells  were  shut  in,  at  a  time  when  the  entire  production  of 
the  field  was  being  run,  because  the  producer  had  tanks  filled  with 
storage  oil,  accumulated  before  the  pipe  line  commenced  to  purchase 
in  the  field,  and  wished  to  clear  these  tanks  of  such  storage  oil  before 
increasing  his  production,  is  such  producer  entitled  to  have  runs 
made  from  his  lease  by  the  pipe  line  in  quantity  equal  to  the  actual 
daily  production  of  his  wells,  or  in  quantity  equal  to  their  estimated 
capacity  under  normal  conditions? 

5.  In  computing  the  daily  production  of  the  field  is  the  actual 
quantity  produced  from  the  wells  on  each  lease  to  be  considered,  or 
is  their  potential  capacity  as  established  by  estiinates  or  gauges  at  a 
time  when  the  w  ell  was  running  freely  to  be  used  ?  In  other  words, 
when  wells  have  been  shut  in  or  *'  pinched  in  "  in  order  to  prevent  the 
oil  from  being  accumulated  in  storage,  are  such  wells  to  be  rated  in 
computing  the  pro  rata  entitled  to  be  run  from  that  lease  or  pro- 
ducer on  their  potential  capacity  for  production,  or  on  their  actual 
production  ? 

6.  Should  the  prorating  be  figured  for  each  lease  when  more  than 
one  lease  is  operated  by  a  producer,  or  is  the  producer  entitled  to 
have  his  total  pro  rata  allowance  derived  from  all  his  leases  run 
from  whatever  leases  he  or  the  pipe  line  company  may  elect  ?  What 
is  the  answer  to  this  question  when  diverse  royalty  interests  in  the 
different  leases  operated  by  one  producer  are  involved  ? 

Each  of  the  foregoing  questions  is  based  on  some  claim  put  for- 
ward by  one  or  more  of  the  interested  parties  in  the  Healdton  field. 
It  is  obvious,  for  instance,  that  if  a  pipe  line  company  is  bound, 
under  the  common  purchaser  clause,  to  purchase  stock  or  storage  oil 
accumulated  on  leases  before  it  begins  to  make  any  purchases  in  the 
field,  that  its  refusal  to  make  such  purchases  would  constitute  dis- 
crimination against  the  producer  having  such  "stock"  oil.  Like- 
wise, in  cases  where,  in  order  to  avoid  the  expense  of  providing 
tanks  or  earthen  storage  of  sufficient  capacity  to  take  care  of  the 
largest  potential  output  of  his  wells,  a  producer  has  shut  in  or 


DISCRIMINATION  CHARGES. 


63 


,\ 


"pinched  in"  the  wells  to  reduce  their  output,  the  question  of 
whether  or  not  there  was  discrimination  by  the  pipe  line  company  in 
his  case  might  hinge  on  the  decision  as  to  whether  the  potential 
daily  capacity  of  the  wells  or  the  actual  daily  output  is  the  proper 
basis  for  computing  the  quantity  of  oil  which,  under  the  law,  the 
pipe  line  company  is  bound  to  purchase  from  that  producer. 

In  the  absence  of  any  judicial  determination  of  the  various  points 
raised,  the  Bureau  of  Corporations,  in  answering  the  question  of 
discrimination  raised  in  the  Senate  resolution  directing  its  investi- 
gation, has,  for  the  purpose  of  this  report,  considered  that,  during 
the  period  from  January  26  to  March  23,  when  the  pipe  line  com- 
pany was  purchasing  a  quantity  of  oil  which  closely  corresponded 
to  the  production  of  the  field  during  that  period,  estimated  on  the 
basis  of  pipe  line  runs  and  stocks  of  oil  in  storage  on  the  leases, 
the  actual  output  of  the  wells  should  be  taken,  and  not  the  potential 
capacity.  In  other  words,  if  a  producer,  during  this  period,  pre- 
ferred to  restrict  the  output  of  his  wells,  instead  of  providing  the 
necessary  tankage  to  store  it  until  it  was  taken  by  the  pipe  line  com- 
pany (which  has  a  legal  limit  of  30  days  in  which  to  correct  inequali- 
ties in  running  oil  from  the  different  producers),  the  Bureau  con- 
siders that  he  was  entitled  to  have  run  by  the  pipe  line  company  his 
actual  output,  not  his  potential  capacity. 

The  Bureau  considers  that  after  the  company  gave  notice  (about 
March  23)  that  it  was  not  able  to  take  the  entire  output  of  the  field, 
that  the  potential  capacity  of  the  wells,  and  not  the  actual  output, 
should  be  the  basis  for  prorating  the  oil  as  between  producers.  Such 
a  proceeding  is  in  line  with  the  elimination  of  waste,  which  would 
arise  from  the  construction  of  unnecessary  tankage  and  the  dete- 
rioration of  the  oil  in  storage.  After  March  23  there  existed  a  situa- 
tion forced  upon  the  producer  by  the  inability  of  the  pipe  line  com- 
pany to  take  the  existing  daily  production.  Before  that  time  the 
producer  curtailed  his  output  merely  as  an  accommodation  to  his 
own  operations. 

Section  2.  Geneial  discussion  of  the  charges  of  discrimination. 

The  output  of  the  discovery  well  in  the  Healdton  field,  brought  in 
August  6,  1913,  was  rated  at  25  barrels  a  day.  According  to  testi- 
mony presented  in  behalf  of  the  Magnolia  Pipe  Line  Co.  at  the 
Corporation  Commission  hearings,  and  to  other  evidence  obtained 
by  the  Bureau,  D.  C.  Stewart,  superintendent  of  the  Magnolia  Petro- 
leum Co.'s  pipe  line  department,  advocated  the  building  at  an  early 
date  by  the  Magnolia  interests  of  two  55,000-barrel  steel  tanks  in 
which  to  store  the  production  pending  the  completion  of  the  pipe 
line.    In  spite  of  some  opposition  on  the  part  of  other  officers  of 


I 


64 


CONDITIONS  IN   THE  HEALDTON   OIL  FIELD. 


the  company,  who  doubted  whether  the  prospects  of  the  field  war- 
ranted so  large  an  outlay  for  storage  facilities,  Mr.  Stewart's  project 
was  approved.  Pending  the  construction  of  these  steel  storage  tanks, 
the  Magnolia  Petroleum  Co.  furnished  the  material  for  1,600-barrel 
wooden  tanks  free  of  charge  to  the  following  producers:  Humble 
Oil  Co.,  two  tanks;  Rex  Oil  Co.,  one  tank;  Crystal  Oil  Co.,  two  tanks; 
1911  Oil  Co.,  two  tanks;  Dundee  Petroleum  Co.  (successor  to  the 
Red  River  Oil  Co.),  four  tanks.  According  to  D.  C.  Stewart's 
.statement  to  the  Bureau — 

The  Magnolia  Petroleum  Company  furnished  tanks  delivered  at  railroad ;  the 
producers  erected  same,  with  no  consideration,  and  had  privilege  of  buying 
later  on.  At  the  time  these  tanks  were  furnished,  the  Magnolia  Pipe  Line  Com- 
pany had  not  been  organized.  It  was  done  to  afford  means  to  test  the  early 
wells,  and  as  a  temporary  accommodation. 

The  first  55,000-barrel  storage  tank  was  completed  January  27, 
1914,  and  the  second  on  February  25, 1914.  The  pipe  line  was  opened 
for  the  regular  business  of  transporting  oil  from  Healdton  on  March 
11.  At  that  time  the  estimated  daily  production  of  the  field  was 
about  6,300  barrels.  The  estimated  capacity  of  the  pipe  line  at 
this  time  was  10,000  barrels  per  day. 

At  the  time  of  the  March  13  hearing  before  the  Corporation  Com- 
mission the  subject  of  the  capability  of  the  pipe  line  to  take  care  of 
the  future  output  from  the  field  was  brought  up.  The  following  is 
from  the  official  record  of  the  hearing.  In  the  course  of  his  remarks 
referring  to  Healdton  conditions,  George  C.  Greer,  counsel  for  the 
pipe  line  company,  said :  * 

We  are  going  to  take  care  of  the  field  to  the  full  extent  that  we  had  planned 
for.  That  is,  so  far  as  I  know,  and  the  manager  is  here  and  he  tells  me  so  far 
as  he  knows  that  is  the  plan,  10,000  barrels  per  day.  If  the  production  there 
exceeds  our  capacity  we  are  going  to  follow  your  law  and  pro-rate  it.  If  the 
production  is  15,000  barrels  and  our  capacity  is  10,000  and  we  can  take  10,000 
and  pay  for  it,  we  can  only  take  as  near  as  we  can,  ten-fifteenths  from  every 
man. 

The  foregoing  is  an  amplified  form  of  a  similar  statement  which 
Mr.  Greer  had  previously  made  at  this  hearing  in  connection  with 
the  discussion  of  the  quality  of  the  oil.  (Transcript  of  Corporation 
Commission  hearing,  p.  8.)  The  following  extract  from  the  hear- 
ings also  bears  upon  this  subject :  * 

Mr.  Greer.  Isn't  it  true  that  we  are  now  taking  care  of  the  present  produc- 
tion? 

Mr.  Mason.  No,  sir. 

Mr.  Franklin.  In  response  to  that  question,  Judge  Greer,  whether  you  know 
It  or  not  or  whether  it  was  done  by  authority,  the  gangers  sent  around  by  your 
company  notified  every  company  they  wouldn't  take  only  a  small  i)er  cent  of 


•  Transcript  of  Corporation  Commission  hearing,  p.  11. 
•Transcript  of  Corporation  Commission  hearing,  pp.  29-30. 


-^ 


t"- 


n 


A 


i 


DISCRIMINATION  CHAEGES. 


65 


their  oil  thereafter.  That  notice  was  given  out  day-bef ore-yesterday.  Doctor 
Smith  has  a  daily  production  of  a  thousand  barrels  and  the  ganger  told  him  he 
wouldn't  take  more  than 

Mr.  Greer.  If  the  ganger  told  him  that  he  didn't  know. 

Mr.  Franklin.  The  ganger  don't  take  it.     It  is  results  we  are  after. 

Mr.  Greer.  We  will  take  all  that  is  there. 

Mr.  Mason.  That  is  very  pleasant  for  us  to  hear  that  you  are  going  to  take  It 

Mr.  Greer.  What  you  have  got  now.    If  you  produce  too  much  we  can  not 

Later  in  the  hearing  it  was  brought  out  that,  because  of  the  drilling 
of  new  wells,  it  was  expected  that  the  daily  output  would  be  increased 
far  over  the  capacity  of  the  pipe  line  to  care  for  it,  and  an  attempt 
was  made  by  the  producers  to  secure  an  order  from  the  Corporation 
Commission  to  compel  the  pipe  line  company  to  provide  enough  addi- 
tional storage  tanks  to  take  care  of  the  anticipated  surplus.  The 
commission,  however,  did  not  act  on  this  request. 

There  is  no  record  in  the  transcript  of  Corporation  Commission 
hearing  of  March  13  of  any  charge  being  made  against  the  pipe 
line  company  of  discriminating  between  producers  in  the  matter  of 
making  its  runs.  The  only  reference  to  the  subject  of  discrimination 
appears  in  Mr.  Greer's  statements  already  referred  to,  in  which  he 
stated  that  if  the  pipe  line  company  found  it  necessary  to  prorate 
its  runs,  it  would  do  so,  under  the  law,  without  discrimination  be- 
tween producers.  Wirt  Franklin,  at  the  Corporation  Commission 
hearing  of  May  1  to  6,  made  the  statement  that  the  hearing  of  March 
13  was  brought  about  because  of  the  charge  by  the  producers  that 
the  pipe  line  company  was  discriminating  between  producers  in 
the  taking  of  oil.**  This  statement  is  not  borne  out  by  the  official 
record  of  the  March  13  hearing ;  not  only  was  there  no  discussion  of 
charges  of  discrimination,  but  Commissioner  Henshaw  stated  at  that 
time  as  follows :  ^ 

This  investigation  was  started  upon  my  own  motion,  making  it  part  of  a 
former  investigation  to  ascertain  the  relative  values  of  oil. 

According  to  statements  made  at  the  Corporation  Commission 
hearing  ^  on  behalf  of  the  Magnolia  Pipe  Line  Co.,  the  officers  of  the 
pipe  line  did  not  attempt  to  establish  any  system  of  prorating  their 
runs  between  producers  until  March  23,  because  up  to  that  time  they 
had  hoped  to  be  able  to  take  care  of  all  of  the  output  of  the  field. 
On  March  23  the  pipe  line  company  gave  oral  notice  through  its 
field  manager,  C.  K.  Stewart,  that  it  would  take  only  4,000  barrels 
per  day  from  the  field.  This  led  to  special  attention  being  given  to 
the  subject  of  an  equitable  prorating  of  the  runs  from  producers. 

•  Transcript  of  Corporation  Commission  hearing,  pp.  36-37. 

*  Transcript  of  Corporation  Commission  hearing,  p.  33. 

"  Transcript  of  Corporation  Commission  hearing,  pp.  8  and  10, 

76568°— 15 5 


\\ 


66 


CONDITIONS  IN   THE  HEALDTON   OIL  FIELD. 


DISCMMINATION  CHARGES. 


67 


Under  the  law  power  does  not  appear  to  be  vested  in  any  one 
authority  to  determine  definitely  the  time  when  a  pipe  line  company 
must  begm  to  prorate  its  purchases  in  a  field  whose  output  threatens 
-/v*"^  n  .^  ««P\"ty  °f  the  pipe  line.  The  law  merely  states  that 
If  It  shall  be  unable  to  perform  the  same,  or  shall  be  legally  excus 
able  from  purchasing  all  the  petroleum  produced,  then  it  shall  pur 
chase  from  each  person  and  producer  ratably,  in  proportion  to  the 
average  daily  production." 

The  position  taken  by  the  Magnolia  Pipe  Line  Co.  in  regard  to  the 
charge  of  d.scrimin.ntion  and  its  action  in  prorating  is  set  forth  in 
Its  response  to  the  Corporation  Commission,  filed  at  the  May  1  to  G 

foTlowf-  "*  '"''''^"'  *"  ^''^  ''**"''"*^  general's  complaint.     It  is  as 
This  defendant  denies  that  it  has,  at  any  time,  discriminated  between  the 

March  4th,  1914,  and  from  that  time  op  to  about  March  23rd,  1914  according 
to  Its  best  Judgment  and  estimate,  it  took  oil  equal  to  the  current  prXt  on 
from  tlH,  producers  in  the  field.  At  any  rate,  if  there  were  any  Ineiuamies  ^ 
tween  the  producers,  it  was  unintentional,  and  the  same  were  adj3  within^ 
i^riod  of  thirty  days  from  the  time  this  defendant  began  to  o^li^n! 
March  2:ird  it  became  apparent  that  the  production  of  said  fleW  w's  bt^nd 
the  amount  that  this  defendant  could  purchase,  and  therefore.  It  Then^ega^ 
o  prorate  the  oil  between  the  producers  according  to  their  respective  pr^T 
tions   and  has,  as  aforesaid,  since  said  date  purchased  and  taken  a H  t^^on 

the  difficulties  that  confronted  It  and  its  financial  Inability  to  do  more. 

A  sworn  statement,  obtained  by  the  Bureau  of  Corporations  from 
follow^iiT"  '"""'^"'        '^"  P'P' """  ''^•'"P^"^'  ^°"*«'«<^d  the 

6 

That  op  to  about  March  23,  1914,  the  production  had  been  In  the  Judgment  of 
affiant  and  others  in  charge  of  said  pl,«  line,  such  that  the  Pipe  Line  cin.nv 
could  receive  and  handle  all  of  it  and,  therefore,  the  PlpTLlne  Commnv 
was  up  to  that  date  endeavoring  to  take,  and  took  as  far  as  practical  thHZI 
current  production  (not  including  the  stock  oil),  deeming 'such  cour^  a  fir 
and  substantial  compliance  with  the  Oklahoma  statutes. 

04'^ilTv^V  t'^^  ^"^""'  ^}^  ^'"^  ^"^  ^•^"^  that  on  January 
.4  J  rank  Edmgton,  a  gauger  of  the  company,  made  a  detailed  re- 
port of  the  condition  of  the  field,  giving  the  names  of  producers  and 
eases,  he  number  of  wells  completed,  number  of  wells  drilling 
total  estimated  daily  production  from  each  lease,  and  the  quantity 
of  "stocky  or  storage  oil  held  on  each  lease.  He  reported  a  S 
estimated  daily  production  for  the  field  of  1,555  barrels,  and  23  82-5 
barrels  of  "stock"  oil.  On  March  25,  in  a  'similar  detaiW  repS 
he  reported  the  total  estimated  daily  production  of  the  field  at  9,625 


l^     • 


4 


/ 


>^  ■      .'L 


■i 


I 

i 


barrels,  and  the  quantity  of  oil  in  storage  at  32,915  barrels.  The 
Bureau  of  Corporations  has  computed  from  the  data,  found  in  the 
Magnolia  Pipe  Line  files,  dealing  with  well-completion  reports, 
records  of  pipe-line  runs,  statements  of  stock  oil  on  leases,  and  of 
estimated  daily  production  on  the  leases,  the  total  estimated  produc- 
tion based  on  the  estimated  daily  capacity  of  the  wells,  and  the  total 
estimated  production,  based  on  the  records  of  the  pipe-line  runs 
from  each  lease  together  with  the  stocks  of  oil  stated  in  the  gangers' 
reports  to  have  been  on  the  leases  on  January  24  and  March  25. 

The  Bureau  j&nds  that  the  quantity  of  oil  produced  in  the  field  for 
the  period  January  26  to  March  22,  inclusive,  if  computed  on  the 
basis  of  the  reported  estimated  daily  production  of  each  lease,  was 
220,825  barrels,  and,  if  computed  on  the  basis  of  pipe-line  runs, 
producers'  records  and  stocks  of  oil  on  hand  on  the  leases,  was 
170,220  barrels.  (See  note,  Table  11,  p.  83.)  The  total  pipe-line  runs 
during  this  period  were  170,667.05.  The  actual  pipe-line  runs  were 
about  74  per  cent  of  the  total  production,  computed  on  the  basis  that 
each  well  produced  each  day  up  to  its  full  rated  capacity,  and  were 
about  100.3  per  cent  of  the  total  production,  computed  on  the  basis 
of  oil  actually  run  off  the  leases  through  the  pipe  line,  taking  into 
consideration  estimated  stocks  on  hand  on  January  26  and  March  23 
and  certain  producers'  records.  The  Bureau  considers  that  the  latter 
basis  is  the  more  reliable  one  to  follow,  since  there  is  abundant 
evidence  that  the  wells,  on  many  of  the  leases,  were  not  allowed 
during  this  period  to  produce  at  their  full  capacity,  because  of  the 
lack  of  storage  facilities  in  which  to  keep  the  oil  until  the  pipe  line 
company  ran  it.  As  is  shown  elsewhere  (see  p.  86),  this  does  not 
necessarily  mean  that  the  pipe  line  company  took  the  current  actual 
output  of  each  producer. 

There  is  evidence  that  a  part  of  the  oil  taken  during  this  period 
was  "  stock  "  oil  accumulated  before  January  26.  For  example,  ac- 
cording to  Mr.  Edington's  report  of  February  25,  the  "  stock  "  oil  in 
storage  in  the  field  amounted  to  18,975  barrels.  This  was  a  reduc- 
tion from  the  stock  oil  reported  for  January  24  of  4,850  barrels. 
Between  February  25  and  March  25,  according  to  the  Edington  re- 
ports, the  amount  of  stock  oil  increased  13,940  barrels,  which  repre- 
sents the  excess  of  the  actual  output  of  the  field  over  the  pipe-line 
runs  during  that  period. 

The  acts  of  the  pipe  line  company,  alleged  by  the  producers  to 
have  been  discriminations,  all  took  place  prior  to  March  23,  the  date 
on  or  about  which,  according  to  the  statement  of  the  pipe  line  com- 
pany, it  became  apparent  to  them  that  the  production  of  the  Heald- 
ton  field  was  beyond  the  quantity  that  they  could  purchase. 

The  attorney  general,  in  his  bill  of  complaint  which  brought  about 
the  Corporation  Commission  hearing  of  May  1  to  6,  used  general 


68 


CONDITIONS  IN   THE   HEALDTON   OIL  FIELD. 


DISCRIMINATION  CHARGES. 


69 


terms  in  charging  the  acts  of  discrimination.  In  enumerating  the 
*'  forbidden  and  unlawful  practices  in  the  purchasing  and  piping 
from  said  Healdton  oil  field  "  he  specified,  among  other  practices  as 
follows : 

By  reason  of  discrimination  as  between  the  producers  of  oil  in  said  Healdton 
field,  in  taking  the  full  supply  produced  by  one  individual  and  refusing  any 
part  of  that  offered  by  another. 

Section  3.  Alleged  discrimination  in  favor  of  the  McMan  Oil  Co. 

At  the  hearing  the  only  instance  of  alleged  discrimination  on 
which  evidence  was  heard  involved  a  charge  of  favoritism  in  behalf 
of  the  McMan  Oil  Co.  As  this  instance  has  been  given  much  prom- 
inence by  the  producers  before,  during  and  after  the  hearing,  and  it, 
with  one  other  instance,  which  was  not  discussed  at  the  hearing,  ap- 
pears to  be,  so  far  as  the  Bureau's  investigation  has  been  able  to  find, 
the  principal  specific  instance  on  which  the  producers  based  their 
charges  of  discrimination,  the  evidence  will  be  examined  at  some 
length. 

The  charge  of  discrimination  in  favor  of  the  McMan  Oil  Co.  was 
based  on  two  grounds — first,  that  the  company  was  allowed  to  use  a 
field  pump  to  force  its  oil  from  its  tanks  on  its  Woodworth  lease 
through  the  Magnolia  Pipe  Line  Co.'s  gathering  line  into  that  com- 
pany's storage  tank,  while  the  other  companies,  with  one  exception, 
were  running  the  oil  from  their  tanks  into  the  company's  line  by 
gravity;  and  second,  that  the  pipe  line  company  was  taking  the 
McMan's  oil  as  fast  as  it  came  from  the  wells,  but  did  not  take  the 
storage  (or  stock)  oil  of  other  companies,  which  had  previously  been 
accumulated. 

The  evidence  either  given  by  witnesses  at  the  hearings,  or  col- 
lected by  the  Bureau  of  Corporations,  establishes  the  fact  that  the 
McMan  Oil  Co.  installed  a  field  pump  to  force  the  oil  from  the  stor- 
age tanks  which  received  the  production  of  their  wells  on  the  Wood- 
worth  lease,  in  the  southwest  quarter  of  section  32,  township  3  south, 
range  3  west,  into  the  6-inch  gathering  line  of  the  Magnolia  Pipe 
Line  Co.,  which  ran  east  and  west  between  section  32,  of  the  fore- 
going township,  and  section  5  of  the  next  township  to  the  south. 
This  6-inch  gathering  line  also  received  oil  from  adjoining  leases, 
operated  by  other  companies,  the  oil  from  all  such  other  leases 
being  run  by  gravity  from  their  storage  tanks,  and  not  by  means  of  a 
pump.  A  letter  written  on  March  20,  by  G.  W.  Jennings,  superin- 
tendent of  the  Crystal  Oil  Co.,  to  Wirt  Franklin,  president  of  the 
same  company,  gives  a  clear  description  of  the  situation  at  that  time. 
(See  Exhibit  16,  p.  115.)  The  production  from  the  wells  on  the  leases 
of  the  Producers'  Oil  Co.  and  the  1911  Oil  Co.  had  to  pass  the  McMan 
lease  on  its  way  to  the  pipe-line  storage  tanks;  that  from  the  McMan 


/ 


.i 


> 


had  to  pass  the  leases  of  the  Ideal  Oil  Co.  and  of  Wrightsman  & 
Foster. 

G.  W.  Jennings  testified  at  the  Corporation  Commission  hearing" 
of  May  1  to  6  that  the  properties  of  the  Ideal  Oil  Co.  directly  on  the 
east  and  the  1911  Oil  Co.  directly  on  the  west  were  on  the  same  ele- 
vation as  that  of  the  McMan  Oil  Co.,  and  that  the  Ideal  and  1911 
oil  was  run  by  gravity,  while  the  McMan  oil  w  as  being  pumped  into 
the  pipe  line.  When  questioned  by  counsel  for  the  pipe  line  as  to 
whether  he  had  made  a  test  to  see  if  at  that  particular  time  the 
McMan  oil  would  run  by  gravity  or  had  to  have  a  pump,  Mr.  Jen- 
nings admitted  that  he  did  not  test  it. 

On  the  other  hand,  R.  M.  McFarlin,  vice  president  of  the 
McMan  Oil  Co.,  testified  that  at  about  March  20  his  company  had 
tried  for  several  days  to  run  their  oil,  and  that  the  1911  Oil  Co.'s 
property  west  of  them  was  on  a  ridge  and  a  good  deal  higher  than 
the  McMan  property  and  had  1,600-barrel  tanks;  that,  w^hen  the  1911 
Oil  Co.  turned  on  their  oil,  the  McMan  oil  would  not  come  out  at  all, 
because  its  tanks  (of  250  barrels  capacity)  were  smaller  and  lower; 
that  thereupon  the  pipe  line  tried  to  run  the  McMan  oil  east,  the  line 
coming  over  the  Ideal  Oil  Co.'s  lease,  but  that  the  oil  would  not 
gravitate  over  the  ridge,  and  that  therefore  the  pipe  line  company 
furnished  the  McMan  company  a  pump  and  that  they  pumped  over 
into  that  line  at  such  times  as  the  Ideal  Oil  Co.  was  not  running  its 
oil.  He  claimed  a  daily  production  from  the  wells  on  the  lease  which 
were  not  shut  in  at  that  time  of  from  2,500  to  2,600  barrels.^ 

According  to  the  G.  W.  Jennings  letter  of  March  20  (see  Exhibit 
16,  p.  115),  the  McMan  Oil  Co.  at  the  time  of  his  investigation  was 
using  a  field  pump  to  empty  two  of  their  tanks.  Also,  oil  was  being 
run  into  the  pipe  line  from  one  of  the  Ideal  Oil  Co.'s  1,600-barrel 
tanks  and  from  one  of  the  Producers'  Oil  Co.'s  1,600-barrel  tanks. 
The  statement  in  regard  to  the  Ideal  Oil  Co.  is  at  variance  with 
R.  M.  McFarlin's  testimony  at  the  Corporation  Commission's  hear- 
ing, to  the  effect  that  the  McMan  Oil  Co.  pumped  over  into  the  Ideal 
Oil  Co.'s  line  at  such  times  as  that  company  was  not  running  its  oil.^' 
No  complaint  on  the  part  of  the  Ideal  Oil  Co.  in  regard  to  the 
pipe  line  company's  conduct  in  running  oil  from  their  lease  has  l>een 
brought  to  the  notice  of  the  Bureau  of  Corporations.  C.  J.  Wrights- 
man  stated  to  an  agent  of  the  Bureau  that  from  the  very  beginning 
the  pipe  line  discriminated  in  favor  of  the  McMan  Oil  Co.  and  the 
Corsicana  Petroleum  Co.  in  running  the  oil.  On  the  other  hand, 
John  F.  Black,  the  manager  of  the  Producers'  Oil  Co.,  stated  to  the 
same  agent  that,  while  it  was  easily  possible  for  the  pipe  line  cora- 

•Transcript  of  Corporation  Commission  hearing,  pp.  126-129. 

*  Transcript  of  Corporation  Commission  hearing,  pp.  150-170. 

•  Transcript  of  Corporation  Commission  hearing,  p.  152. 


70 


CONDITIONS  IN   THE  HEALDTON  OIL  FIELD. 


DISCRIMINATION  CHARGES. 


71 


pany  to  make  a  mistake  in  their  efforts  to  serve  all  producers  alike, 
according  to  their  output,  the  best  information  he  could  get  from  the 
Producers'  field  manager  disclosed  nothing  that  would  justify  any 
claim  of  discrimination. 

E.  A.  Latimer,  general  manager  of  the  Magnolia  Pipe  Line  Co., 
informed  the  Bureau  that  the  pump  was  installed  on  March  8,  and 
its  use  discontinued  on  March  23,  because  the  6-inch  gravity  line 
was  extended  so  that  the  pipe  line  company  was  able  to  handle  the 
prorated  quantity  by  gravity.  The  extension  was  completed  on 
March  21.  No  difficulty  was  found  in  running  oil  by  gravity  with- 
out the  pump  after  the  extension  of  the  6-inch  gravity  line. 

Mr.  McFarlin,  in  his  testimony  at  the  hearing,  in  answer  to  a 
question  concerning  the  necessity  of  using  a  pump  to  get  his  oil  into 
the  pipe  line  company's  gathering  line,  stated :  <» 

Ours  wouldn't  gravitate  out  that  way  when  the  1911  people  were  on  with 
1,600-barrel  tanks,  and,  another  thing,  the  Magnolia  had  been  furnishing  1,600- 
barrel  tanks  to  the  other  people.  They  never  did  furnish  my  people  that.  I 
couldn't  buy  one  at  this  timo. 

The  following  statement,  based  on  the  G.  W.  Jennings  letter  of 
March  20  (see  Exhibit  16,  p.  115),  shows  the  relative  storage  capacity 
of  the  different  producing  properties  near  the  McMan  Oil  Co.'s 
lease : 


Name. 


1911  on  Co 

Ideal  Oil  Co 

Producers'  Oil  Co 

Wrightsman  &  Foster 
McMan  OU  Co 


Tanks, 


I 


Capacity 
of  each. 


Barrels. 
1,600 

250 
1,600 
1,600 
1,600 

250 


Total 
capacity. 


BarreU. 

9,000 

3,200 
3,200 
4,800 
1,250 


It  is  obvious  that  with  a  total  storage  capacity  of  only  1,250  barrels 
and  an  estimated  production  of  from  2,500  to  2,600  barrels  per  day, 
that  it  would  be  necessary  to  draw  oil  from  the  McMan  tanks  more 
or  less  continuously  in  order  to  keep  them  from  overflowing.  And, 
if  it  is  a  fact,  as  was  claimed  by  Mr.  McFarlin,  and  no  evidence  to 
prove  the  contrary  was  introduced  at  the  Corporation  Commission 
hearing,  that  the  oil  would  not  flow  by  gravity  from  the  storage 
tanks  of  this  lease  into  the  pipe  line,  under  the  conditions  which 
existed  on  or  about  March  20,  then  it  is  evident  that  no  discrimi- 
nation against  other  producers  was  involved  in  the  use  of  a  pump 
by  the  McMan  company  so  long  as  the  quantity  of  oil  taken  from 

•  Transcript  of  Corporation  Commission  hearing,  p.  162. 


/ 


<« 


.i 


them  through  that  means  did  not  exceed  the  proportion  of  their 
daily  production  which  they  were  entitled  to  have  run.  In  other 
words,  the  fact  that  the  McMan  Oil  Co.  was  allowed  to  use  a  pump 
does  not  of  itself  show  discrimination  in  their  favor  on  the  part  of 
the  Magnolia  Pipe  Line  Co. 

The  estimated  production  for  this  lease,  as  computed  from  the 
records  of  the  Magnolia  Pipe  Line  Co.  by  the  Bureau  of  Corporations 
for  the  period  February  1  to  March  22,  inclusive,  was  24,292.72  barrels 
and  the  actual  pipe-line  runs  during  that  period  23,042.34  barrels,  or 
94.9  per  cent  of  the  oil  produced.  The  pipe  line  company  during  this 
period,  January  26  to  March  22,  inclusive,  took  a  quantity  of  oil  equal 
to  100.3  per  cent  of  the  current  production  of  the  field.  It,  therefore, 
did  not  take  from  the  McMan  Oil  Co.,  by  5.4  per  cent,  the  quantity  of 
oil  which  that  company  was  entitled  to  have  run  during  that  period. 

During  the  period  from  March  23  to  May  11,  inclusive,  when  the 
prorating  system  established  by  the  pipe  line  company  was  in  effect, 
the  quantity  of  oil  bought  by  that  company  from  the  McMan  Oil 
Co.  was  1,682.28  barrels  or  11.9  per  cent  more  than  it  was  entitled  to 
have  taken  under  the  pro  rata  proportion. 

Section  4.  Alleged  discrimination  in  favor  of  the  Corsicana  Petroleum  Co. 

The  Corsicana  Petroleum  Co.,  as  has  been  already  stated,  is  the 
producing  branch  of  the  Magnolia  interests,  and  is  connected  with 
the  Magnolia  Petroleum  Co.  and  the  Magnolia  Pipe  Line  Co.  through 
having  a  number  of  prominent  stockholders  in  common.  The  Cor- 
sicana Petroleum  Co.  owns  several  leases  in  the  Healdton  field  which 
are  held  or  operated  under  its  own  name.  The  first  well  to  be  com- 
pleted on  such  leases  was  well  No.  1  on  the  Roy  Chilton  lease,  com- 
pleted MarcTi  31.  There  was  no  production  run  from  any  of  these 
leases  prior  to  March  31,  1914,  and  no  field  pumps  were  used  to 
force  the  oil  into  the  pipe  lines.  The  Corsicana  Petroleum  Co.  also 
has  part  interest  in  six  leases  in  which  the  McMan  Oil  Co.  is  also 
interested.  The  first  wells  to  be  completed  on  such  leases  were  well 
No.  2,  on  March  23,  and  well  No.  1,  on  March  24,  both  on  the  E.  T. 
Richards  lease.  The  charge  that  the  pipe  line  company  has  dis- 
criminated in  favor  of  the  Corsicana  Petroleum  Co.  apparently  arose 
from  the  belief  on  the  part  of  various  producers  that  the  Corsicana 
Petroleum  Co.  had  benefited  in  some  way  through  the  alleged  favor- 
itism shown  the  McMan  Oil  Co.  in  allowing  that  company  to  use  a 
pump  on  one  of  its  leases.  As  will  be  seen  from  Table  1,  on  page  14, 
in  which  all  of  the  holdings  of  the  Corsicana  Petroleum  Co.  are 
listed,  it  had  no  interest  in  the  Woodworth  lease  in  the  southwest 
quarter  of  section  32,  township  3  south,  range  3  west,  which  is  the 


72 


CONDITIONS  IN   THE   HEALDTON   OIL  FIELD. 


DISCRIMINATION  CHARGES. 


73 


lease  referred  to  in  tiie  cliarge  that  the  pipe  line  discriminated  in 
favor  of  the  McMan  Oil  Co.    (See  p.  68.) 

Section  5.  Alleged  discrimination  in  favor  of  the  Dundee  Petroleum  Co. 

The  Red  River  Oil  Co.  was  organized  for  the  purpose  of  drilling 
oil  and  gas  wells  in  the  southwestern  part  of  Oklahoma.  The 
Dundee  Petroleum  Co.  was  later  organized  to  take  over  the  prop- 
erty and  business  of  the  Red  River  Oil  Co.  and  of  another  company, 
the  Ralston  Oil  Co.,  which  does  not  operate  in  the  Healdton  field. 
It  should  be  observed  that  when  informants  were  discussing  the 
alleged  discrimination  that  some  called  the  company  the  Dundee, 
and  some  the  Red  River,  but  that  they  all  referred  to  the  use  of  a 
pump,  by  the  company  in  question,  in  running  oil,  at  or  about  March 
20  from  the  Carrie  L.  McClure  lease,  in  the  southwest  quarter  of 
section  5,  township  3  west,  range  4  south. 

The  G.  W.  Jennings  letter  of  March  20  (see  Exhibit  16,  p.  115) 
called  the  attention  of  Wirt  Franklin,  president  of  the  Crystal  Oil 
Co.,  to  the  length  of  time  it  took  to  run  by  gravity  a  1,600-barrel 
tank  of  oil  into  the  pipe  line,  pointed  out  that  the  Red  River  Oil  Co. 
with  similar  connections  to  the  pipe  line  were  using  a  pump,  and 
requested  Mr.  Franklin  to  see  if  he  could  not  get  the  Crystal  Oil  Co. 
a  pump. 

Wirt  Franklin,  on  April  27,  stated  to  an  agent  of  the  Bureau  that 
the  Dundee  Petroleam  Co.  is  composed  of  old  producers  who  have 
had  dealings  with  the  Standard  Oil  Co.  in  other  fields,  and  they 
had  always  received  much  better  treatment  from  the  pipe  line  com- 
pany than  had  the  rest  of  the  producers.    He  claimed  that  the  fact 
that  the  McMan  and  the  Dundee  companies  were  permitted  to  use 
pumps  when  the  other  producers  had  to  be  content  with  running 
the  oil  by  gravity  was  pretty  strong  evidence  of  discrimination,  for 
when  the  pumps  were  working  it  was  impossible  for  the  oil  running 
through  gravity  lines  to  enter  the  gathering  line,  as  the  pressure 
from  the  pumps  not  only  held  the  gravity  oil  back,  but  in  numerous 
instances  the  gravity  oil  was  forced  back  into  the  tanks  from  which 
it  should  have  been  flowing  freely.    B.  A.  Simpson  and  I^  H.  Love, 
officials  of  the  Ardhoma  Oil  Co.,  stated,  on  April  29,  to  an  agent  of 
the  Bureau  that  up  to  the  last  week  in  March  the  McMan  Oil  Co. 
and  the  Red  River  Oil  Co.  were  favored  and  permitted  to  use  pumps 
to  force  their  oil  into  the  gathering  lines,  while  all  other  producers 
had  to  rely  upon  the  gravity  system;  that  every  time  the  Red  River 
company  started  its  pump  it  would  force  the  oil  back  into  the  tanks 
of  the  Ardhoma  company  and  it  was  impossible  to  run  any  oil  until 
the  Red  River  pump  was  stopped,  and  that  about  March  23  the  pipe 


./.  .  I 


line  company  made  the  Red  River  company  quit  using  its  pump  to 
force  its  oil  into  the  gathering  line.  The  name  of  the  Dundee  Petro- 
leum Co.  first  appears  in  the  transcript  of  the  Corporation  Com- 
mission hearing  of  May  1  td  6,  on  page  126,  when,  during  the  testi- 
mony of  Mr.  Jennings,  Attorney  General  West  asked,  ''Was  there 
any  other  company  being  treated  like  the  Dundee  and  the  McMan?" 
and  received  the  following  answer:  "Not  exactly.  The  Dundee  had 
a  small  pump."  No  further  mention  of  any  alleged  favoritism  shown 
the  Dundee  Petroleum  Co.  occurred  at  the  hearing. 

On  April  28  W.  S.  Critchlow,  secretary  and  general  manager  of  the 
Red  River  Oil  Co.  and  the  Dundee  Petroleum  Co.,  stated  to  an  agent 
of  the  Bureau  that  he  had  heard  the  other  producers  had  made  com- 
plaint because  his  company  was  using  a  pump  to  force  its  oil  into 
the  gathering  line,  but  this  was  a  right  that  every  producer  had  in 
all  other  fields  and  his  company  simply  followed  custom  until  the 
pipe  line  company  requested  that  the  pump  be  stopped.    Later,  in  a 
sworn  statement  made  to  the  Bureau  of  Corporations,  J.  M.  Critch- 
low, president  of  the  Dundee  Petroleum  Co.,  not  only  emphatically 
denied  that  any  favoritism  had  been  shown  to  his  company  by  the  pipe 
line  company  but  he  also  asserted  that  his  company  had  had  less  than 
its  proper  proportion  of  oil  run  and  to  that  extent  had  been  discrimi- 
nated against.    He  stated,  however,  that  he  was  convinced  that  the 
reason  for  this  apparent  discrimination  lay  in  the  newness  and  the 
unexpected  situations  arising  in  the  field,  and  that  he  was  not  dis- 
posed to  blame  the  pipe  line  company.     E.  A.  Latimer,  general  man- 
ager of  the  Magnolia  Pipe  Line  Co.,  informed  the  Bureau  that  the 
pump  was  installed  about  March  1  and  its  use  discontinued  on  March 
23  on  account  of  the  reduction  in  pipe-line  runs,  which  made  it  pos- 
sible to  handle  the  output  by  gravity.     Before  that  there  was  difficulty 
in  handling  the  oil  by  gravity. 

The  estimated  production  for  the  Dundee  Petroleum  Co.  leases  as 
computed  by  the  Bureau  for  the  period  January  26  to  March  22,  in- 
clusive, was  15,372.52  barrels  and  the  actual  pipe-line  runs  during 
that  period  23,642.44  barrels,  or  153.8  per  cent  of  the  oil  produced. 
The  pipe  line  company  during  this  period  took  a  quantity  of  oil 
equal  to  100.3  per  cent  of  the  estimated  current  production  of  the  field. 
It,  therefore,  took  from  the  Dundee  Petroleum  Co.  53.5  per  cent  more 
than  the  quantity  of  oil  which  that  company  was  entitled  to  have  run 
during  that  period,  in  view  of  the  fact  that  the  current  production 
of  all  the  other  producers  was  not  also  taken.  This  extra  oil  was 
storage  oil,  accumulated  before  the  pipe  line  company  began  on 
January  26  to  purchase  oil  in  the  Healdton  field.  According  to  the 
January  24  report  of  Frank  Edington,  the  pipe  line  company  ganger, 
the  Dundee  Petroleum  Co.  had  13,875  barrels  of  storage  oil  accu- 


74 


CONDITIONS  IN   THE   HEALDTON   OIL  FIELD. 


DISCRIMINATION  CHARGES. 


75 


mulated  on  its  leases.  According  to  his  report  of  February  25,  the 
quantity  of  storage  oil  was  then  8,050  barrels,  and  on  March  25  it  was 
8,840  barrels. 

The  Bureau's  estimate  of  the  Dundee  Petroleum  Co.'s  storage  oil 
as  of  date  of  January  26  is  14,875  barrels,  and  as  of  date  of  March 
23,  is  6,605.08  barrels.  This  is  arrived  at  by  using  the  estimated  daily 
production  reported  by  Mr.  Edington  and  deducting  the  actual  pipe- 
line runs.  It  will  be  noted  that,  according  to  these  computations, 
based  on  the  Magnolia  Pipe  Line  Co.'s  records,  not  only  was  the 
entire  current  production  of  the  Dundee  Petroleum  Co.  run  at  this 
period,  but  also  about  8,270  barrels  of  storage  oil. 

The  Bureau  was  not  able  to  secure  from  the  Dundee  Petroleum 
Co.'s  records  a  statement  showing  its  actual  daily  production  during 
this  period,  as  the  records  were  not  kept  in  such  a  form  that  the 
information  requested  could  be  derived  from  them.  It  did  secure  a 
statement  from  the  company  showing  the  estimated  daily  capacity  of 
the  leases,  by  months. 

During  the  period  from  March  23  to  May  11,  inclusive,  when  the 
prorating  system  established  by  the  pipe  line  company  was  in  op- 
eration, the  quantity  of  oil  purchased  by  it  from  the  Dundee  Petro- 
leum Co.  was  93.5  per  cent  of  the  quantity  that  company  was  entitled 
to  have  taken,  being  2,226.17  barrels  short.    (See  Table  12,  p.  84.) 

Section  6.  Alleg:ed  discriniination  in  favor  of  the  Faraffine  Oil  Co. 

When  an  agent  of  the  Bureau  interviewed,  on  April  29,  F.  J. 
Alderson,  manager  of  the  Paraffine  Oil  Co.,  and  discussed  the  subject 
of  discrimination  with  him,  Mr.  Alderson  stated  that  if  they  got  any 
preference  at  all  from  the  pipe  line  company  it  must  have  been  be- 
cause the  lease  and  tanks  were  kept  in  good  condition,  and  made 
readily  accessible  to  the  tank  gangers,  so  that  they  would  not  have  to 
climb  over  sloppy  leases  or  dirty  field  tanks. 

In  a  sworn  statement  J.  M.  Critchlow,  president  of  the  Dundee 
Petroleum  Co.,  declared  that  the  pipe  line  company  had  taken  from 
the  40-acre  Cruce  lease  adjoining  the  110-acre  Carrie  L.  McClure 
lease  of  the  Dundee  Petroleum  Co.  almost  as  much  oil  as  it  had 
from  the  Dundee  Petroleum  Co.'s  lease,  including  the  latter's  stock 
oil,  although  the  Dundee  company  was  an  actual  producer  in  the 
field  before  the  Paraffine  Oil  Co.  Mr.  Critchlow,  however,  stated 
that  he  did  not  make  this  statement  as  a  complaint  against  the  pipe 
line  company  for  favoring  the  Paraffine  company  as  compared  with 
the  Dundee  Petroleum  Co.  He  considered  the  incident  as  one  of  the 
things  that,  owing  to  the  newness  and  unorganized  condition  of  the 
field,  was  unavoidable. 

The  estimated  production  for  the  lease  of  the  Paraffine  Oil  Co., 
as  computed  by  the  Bureau  of  Corporations  for  the  period  January 


1 


*  V  - 


•  i 


V 


26  to  March  22,  inclusive,  was  10,236.54  barrels,  and  the  actual  pipe- 
line runs  during  that  period  were  9,523.69  barrels,  or  93  per  cent 
of  the  estimated  production.  The  pipe  line  company  during  this 
period  took  a  quantity  of  oil  equal  to  100.3  per  cent  of  the  current 
production  of  the  field.  It,  therefore,  did  not  take  from  the  Paraf- 
fine Oil  Co.,  by  7.3  per  cent,  the  quantity  of  oil  which  that  company 
was  entitled  to  have  run  during  that  period. 

Under  the  prorating  plan  of  the  pipe  line  company,  the  quantity 
of  oil  taken  from  the  Paraffine  Oil  Co.  from. March  23  to  May  11, 
inclusive,  was  842.76  barrels,  or  18.4  per  cent  greater  than  it  was 
entitled  to  have  run.    (See  Table  12,  p.  84.) 

Section  7.  The  production  from  Indian  allotment  lands. 

The  Senate  resolution  ordering  the  investigation  of  the  Healdton 
situation  calls  for  specific  information  concerning  discrimination 
against  oil  produced  on  Indian  allotment  land.  No  specific  charge 
of  such  discrimination  has  come  to  the  attention  of  the  Bureau  of 
Corporations.  When  evidence  on  this  particular  subject  was  sought 
by  an  agent  of  the  Bureau  no  person  could  be  found  among  the 
Healdton  producers  who  could  furnish  the  slightest  information 
in  regard  to  any  such  discrimination.  When  the  matter  was  called 
to  the  attention  of  an  official  of  one  of  the  principal  producing  con- 
cerns in  the  field,  that  was  operating  exclusively  on  allotment  land, 
he  stated  that  up  to  the  date  of  the  interview  (April  30)  the  holders 
of  allotment  leases  fared  equally  well  with  the  other  producers  in 
the  matter  of  pipe-line  runs.  This  statement  was  corroborated  by 
the  stockholder  of  another  company,  which  also  was  operating  on 
allotment  land. 

At  the  time  the  Senate  resolution  was  passed,  March  28,  there 
were  but  three  allotment  leases  on  which  oil  w^as  being  produced, 
namely,  the  Cammack  Broke  Shoulder  and  W.  Tillis  leases,  operated 
by  John  Carlock,  and  Allie  Daney  lease,  operated  by  Dunn  &  Gillam. 
Since  that  date  and  prior  to  May  12,  when  the  inspector  appointed  by 
the  Corporation  Commission  took  charge  of  the  prorating  in  the 
Healdton  field,  oil  has  also  been  produced  on  the  Silsaney  Going  (nee 
Jones)  lease,  operated  by  the  Coline  Oil  Co.,  and  the  Walton  Davis 
lease,  operated  by  the  Dundee  Petroleum  Co. 

During  the  period  from  January  26,  1914,  when  the  pipe  line 
company  began  to  purchase  oil,  to  March  23,  when  the  company 
gave  notice  that  it  would  be  unable  to  take  the  entire  daily  output 
of  the  field,  the  estimated  production  and  the  actual  runs  from  the 
Indian  leases  then  producing  oil  were  as  follows:  Cammack  Broke 
Shoulder  lease,  operated  by  John  Carlock,  estimated  production  7,400 
barrels,  actual  pipe  line  runs  from  the  lease  2,966.70  barrels;  Allie 


76 


CONDITIONS  IN   THE  HEALDTON  OIL  FIELD. 


DISCRIMINATION  CHARGES. 


77 


Daney  lease,  operated  by  Dunn  &  Gillam,  estimated  production  4,000 
barrels,  no  pipe  line  runs. 

The  above  estimated  production  for  the  Broke  Shoulder  lease  is 
based  on  the  capacity  of  the  wells,  as  reported  by  Frank  Edington 
the  pipe  line  company's  ganger. 

On  March  15,  he  reported  the  completion  of  well  No.  1  on  this 
lease,  with  500  barrels  production.  As  the  first  pipe-line  run  from 
this  lease  took  place  on  March  12,  of  189.92  barrels,  the  Bureau  of 
Corporations  has,  in  the  absence  of  more  definite  information,  con- 
sidered that  the  lease  began  to  produce  oil  on  March  11,  and  has  as- 
signed to  that  date  a  production  of  500  barrels.  On  March  14  M«\ 
Edington  reported  a  daily  production  of  700  barrels,  on  March  21 
of  500  barrels,  and  on  March  25  of  400  barrels.  On  March  25  he 
reported  that  there  were  900  barrels  of  oil  in  storage  on  this  lease. 
The  amount  of  oil  run  from  the  lease  March  23  and  24  was  383.54  bar- 
rels, or  about  616.46  barrels  less  than  the  estimated  production  for 
those  two  days  (1,000  barrels).  This  would  leave  283.54  barrels  of 
the  storage  oil  assignable  to  the  period  January  26  to  March  22,  inclu- 
sive, and  would  make  the  quantity  actually  produced  on  the  lease  up 
to  March  23,  3,250.24  barrels,  instead  of  the  estimated  production  of 
7,400  barrels,  on  the  basis  of  the  potential  capacity  of  the  lease.  Evi- 
dently the  well  on  this  lease  was  not  allowed  to  produce  at  its  full 
capacity. 

The  figures  used  in  the  above  computations  were  taken  from  the 
records  of  the  Magnolia  Pipe  Line  Co.  The  Bureau  of  Corporations 
tried  to  secure  from  Mr.  Cariock  the  actual  daily  production  from 
this  lease,  for  this  period,  as  shown  by  his  records,  but  he  stated  his 
books  did  not  contain  the  desired  information. 

In  the  case  of  the  Allie  Daney  lease,  operated  by  Dunn  &  Gillam, 
on  March  15,  Mr.  Edington  reported  the  completion  of  well  No.  1, 
with  350  barrels,  and  on  March  20,  of  well  No.  2,  with  400  barrels. 
On  March  25  he  reported  a  daily  production  of  this  lease  of  250 
barrels.  On  the  basis  of  these  figures  the  estimated  production  up 
to  March  23  would  be  4,000  barrels,  and  up  to  March  25,  5,500 
barrels.  As  there  were  no  pipe-line  runs  from  this  lease  the  quantity 
in  storage  on  March  25  should  represent  the  total  production  up  to 
that  time.  Mr.  Edington  reported  on  March  25  that  there  were 
400  barrels  in  storage  on  this  lease.  Evidently  the  wells  on  this  lease 
were  not  allowed  to  produce  at  their  full  capacity. 

The  figures  used  in  the  above  computations  were  taken  from  the 
records  of  the  Magnolia  Pipe  Line  Co.  The  Bureau  of  Corporations 
tried  to  secure  from  Dunn  &  Gillam  the  actual  daily  production 
from  this  lease  for  this  period,  as  shown  by  their  records,  but  was 
not  able  to  obtain  it. 


■  v 


On  April  7,  1914,  D.  H.  Kelsey,  superintendent  of  the  Indian 
agency  at  Muskogee,  telegraphed  the  Magnolia  Pipe  Line  Co.  as 
follows : 

Our  field  inspector  reports  likelihood  of  serious  oil  waste  from  Silsaney  Jones, 
Allie  Daney  and  Broke  Shoulder  Allotments  in  Section  four,  Healdton.  Have 
requested  lessees  to  restrict  new  development  and  urge  you  to  run  present  pro- 
duction to  highest  percentage  possible  without  discriminating  against  other 
lessees.  Please  advise  what  proportion  you  are  taking  from  these  restricted 
Indian  leases. 

The  correspondence  in  the  Magnolia  Pipe  Line  Co.  files  show^s  that 
an  investigation  was  at  once  made  by  the  company  officials.  As  a 
result  of  it,  on  April  8,  George  C.  Greer,  general  attorney  for  the 
pipe  line  company,  sent  the  following  telegram  to  Mr.  Kelsey: 

Our  field  men  advise  have  been  taking  thirty  per  cent  of  total  production  of 
Healdton  field,  including  Silsaney  Jones,  Allie  Daney  and  Cammack  Broke 
Shoulder  Allotments,  and  will  do  everything  possible  without  discriminating 
to  relieve  the  situation. 

The  following  table,  compiled  from  information  found  in  the 
records  of  the  Magnolia  Pipe  Line  Co.,  shows  the  status  of  the  esti- 
mated production,  the  pro  rata  apportionments  and  pipe-line  runs 
on  the  Indian  leases  at  this  time: 

Table  10.— ESTIMATED  PRODUCTION,  PRO  RATA  PROPORTION,  AND  PIPE-LINE  RUNS 
ON  THE  INDIAN  LEASES  IN  THE  HEALDTON  FIELD,  APR.  1-15. 

John  Cariock  ( Cammack  Broke  Shoulder  lease). 


Date. 


March  23-31,  inclusive 


AprUl.. 
AprU2.. 
AprU3.. 
April  4.. 
Aprils.. 
AprU6.. 
April  7.. 
Aprils.. 
April  9.. 
A  prill  0. 
April  11. 
April  12. 
April  13. 
April  14. 
AprUlS. 


Prorata 
estab- 
lished fOT 
field. 


Per  cent. 


32.6 
33.9 
32.9 
33.5 
30.6 
30.4 
30.4 
27.4 
27.3 
25.5 
22.9 
22.3 
21.8 
20.8 
18.1 


Esti- 
mated 
produc- 
tion. 


Barrels. 
3.800 


350 
350 
350 
350 
350 
350 
350 
350 
350 
350 
350 
350 
350 
350 
350 


Produc- 
tion en- 
titled to 
have  run 
under 
pro  rata. 


Barrels. 
1,457 


Pipe-line 
runs. 


Barrels. 
1,504.77 


Pipe-line  runs  com- 
pared with  pro  rata. 


Over. 


Barrels. 
47.77 


114 

118 

115 

117 

107 

107 

106 

96 

96 

89 

80 

78 

76 

73 

64 


291.96 


295.76 


401.94 


385.36 


107.73 


61.43 


123,79 
50.79 


Short 


Barrels. 


66.23 


7.27 
124.27 
231.27 
42.51 
148.51 
244.51 


27.57 
107.57 
185.57 


13.21 


78 


CONDITIONS  IN  THE  HEALDTON  OIL  FIELD. 


Table  10.-ESTIMATED  PRODUCTION   PRO  RATA  PROPORTION,  AND  PIPE-LINE  RtlNo 
ON  THE  INDIAN  LEASES  IN  THE  HEALDTON  FIELD,  APR  1  lili^fto^""''^ 

Coline  Oil  Co.  (Silsaney  Jonet  lease). 


Date. 


March  23-31 ,  inclusive* . 


Prorata 
estab- 
lished for 
field. 


April  1 . 

April  2. 

Aprils. 

April  4.. 

Aprils.. 

April  6.. 

April?.. 

Aprils.. 

April  9. . 

April  10. 

April  11 . 

Aprill2. 

April  13. 

April  14 . 

April  15. 


Per  cent. 


Esti- 
mated 
produc- 
tion. 


32.6 

33.9 

32.9 

33.5 

30.6 

30.4 

30.4 

27.4 

27.3 

25.5 

22.9 

22.3 

21.8 

20.8 

18.1 


Barrds. 


Produc- 
tion en- 
titled to 
have  run 

under 
pro  rata. 


Pipe-line 
runs. 


350 

350 

350 

350 

450 

450 

450 

450 

450 

450 

450 

450 

450 

450 

450 


Barrels.     Barrels. 


114 

118 

115 

117 

138 

137 

137 

123 

123 

115 

103 

100 

98 

94 

82 


198.52 


Pipe-line  runs  com- 
pared with  pro  rata. 


Over. 


Barrels. 


Short. 


Barrels. 


208.37 
209.93 


84.52 


205.38 
207.09 


89.89 

152.82 

14.82 


33.48 


209.93 
211.64 


211.88 


30.29 


122.18 
53.80 


2.22 

110.86 

10.86 


30.74 


92.71 


87.14 


51.26 


Dunn  &  Oillam  (AUie  Daney  lease). 


March  23-31,  inclusive 


Aprill 

April  2 

Aprils 

April  4 

April  5 

April  6 

April  7 

Aprils 

April  9 

April  10 

April  11 

April  12 

Aprill3 

April  14 

April  15 


In  the  foregoing  table  the  pro  rata  percentages  were  computed  by 
obtaining  the  proportion  which  4,000  barrels,  the  daily  amount  to  be 
taken  from  the  field  by  the  pipe  line  company,  bore  to  the  total  esti- 
mated^ production  for  each  day.  The  daily  figures  of  estimated 
production  were  taken  from  the  Magnolia  Pipe  Line  Co  's  records 
as  were  also  the  figures  of  pipe-line  runs.    The  daily  pro  rata  pro- 

•  No  production  reported  before  April  1  for  this  lease  '  ' 

JFor  the  three  producers  who  had  authoritative  records,  the  actual  production   was 


»» 


y 


DISCRIMINATION   CHARGES. 


79 


portion  of  the  production  of  each  lease  was  computed  by  the  Bureau 
by  applying  the  pro  rata  percentage  to  the  estimated  daily  produc- 
tion. The  over  and  short  columns  represent  subtractions  between 
the  pro  rata  production  figures  and  the  pipe-line  runs  for  each  day. 

In  the  case  of  the  Cammack  Broke  Shoulder  and  the  Silsaney 
Jones  leases  it  is  evident  from  an  inspection  of  the  over  and  short 
columns  that  the  oil  to  which  they  were  entitled  under  the  pro  rata 
system  was  being  taken  and  adjustments  made  at  frequent  intervals, 
since  an  excess  would  be  changed  to  a  deficit,  or  vice  versa,  every 
few  days.  In  the  case  of  the  Allie  Daney  lease,  while  apparently  the 
oil  produced  from  April  1  to  April  14  was  being  taken  approxi- 
mately according  to  the  pro  rata  existing  at  that  time,  all  of  the 
quantity  called  for  according  to  the  pro  rata  had  not  been  taken 
between  March  23  and  April  1. 

The  Magnolia  Pipe  Line  Co.,  in  determining  the  quantity  to  be 
taken  from  this  lease  at  the  earlier  period,  did  not  figure  any  pro 
rata  on  the  production  on  this  lease  prior  to  March  28.  On  that  date 
it  estimated  the  production  to  be  250  barrels  and  the  proportion  to 
be  taken  as  104  barrels,  making  416  barrels  for  the  four  remaining 
days  in  March.  But,  according  to  the  monthly  report,  dated  March 
25,  of  Frank  Edington,  the  pipe  line  company's  ganger,  this  lease 
was  reported  to  have  a  production  of  250  barrels  a  day  and  400  bar- 
rels in  storage.  Mr.  Edington  had  previously  reported  the  produc- 
tion of  the  two  wells  on  this  lease— one  in  his  well-completion  report 
of  March  15,  with  350  barrels  initial  production,  and  one  in  his  well- 
completion  report  of  March  20,  with  400  barrels  initial  production. 

On  the  basis  of  the  above  information  the  Bureau  has  considered 
that  this  lease  had  an  estimated  production  of  750  barrels  daily  for 
March  23  and  24,  and  for  the  period  from  March  25  to  March  31,  in- 
clusive, an  estimated  production  of  250  barrels  per  day.  The  quan- 
tity entitled  to  be  run  under  the  pro  rata,  computed  on  this  basis, 
is  1,251  barrels,  instead  of  416.  The  actual  runs  from  this  lease  dur- 
ing the  period  from  March  23  to  31,  inclusive,  were  757.48  barrels, 
or  493.52  less  than  the  quantity  it  was  entitled  to  have  run. 

By  May  12,  on  which  date  the  inspector  appointed  by  the  Cor- 
poration Commission  took  charge  of  the  prorating,  the  excess  of  total 
quantity  the  lease  was  entitled  to  under  the  pro  rata  over  the  total 
of  pipe-line  runs  was  62.78  barrels.  (See  Tpble  12,  p.  84.)  The 
inequality  had  already  been  equalized  on  May  4,  on  which  date  the 
total  pipe-line  runs  were  in  excess  of  the  total  quantity  the  lease  was 
entitled  to  under  the  pro  rata.  In  the  light  of  the  Oklahoma  statute, 
w^hich  says  that  inequalities  must  be  equalized  within  a  period  of 
30  days  (see  p.  61),  according  to  the  Magnolia  Pipe  Line  Co.'s  com- 
putations, there  was  apparently  a  discrimination  in  favor  of  this 
lease,  in  that  more  than  the  proportion  of  oil  it  was  entitled  to  under 


4 


.ii'T, 

i 


80 


CONDITIONS  IN   THE  HEALDTON   OIL  FIELD. 


DISCRIMINATION  CHARGES. 


81 


the  pro  rata  was  run  during  a  continuous  period  of  50  days  (March 
23  to  May  11,  inclusive),  while,  according  to  the  Bureau's  computa- 
tions, there  was  apparently  a  discrimination  against  this  lease,  in 
that  less  than  the  proportion  of  oil  it  was  entitled  to  under  the  pro 
rata  was  run  during  a  continuous  period  of  42  days  (March  23  to 
May  3,  inclusive).  It  should  be  pointed  out,  however,  that  not  only 
is  there  a  discrepancy  between  the  different  pipe-line  records  in  re- 
gard to  the  daily  production  capacity  of  this  lease  prior  to  March 
28,  but  no  definite  information  on  this  point  could  be  obtained  from 
the  Dunn  &  Gillam  records.  Nothing  was  found  in  the  pipe  line 
company  records  that  would  indicate  an  intent  to  discriminate  either 
in  favor  of  or  against  this  lease,  and  any  intent  to  discriminate  in 
favor  of  any  lease  is  denied  in  the  affidavits  of  C.  R.  Stewart  and 
Frank  Edington.     (See  Exhibits  13'and  14,  pp.  112-114.) 

The  following  statement  gives  a  summary  of  the  total  quantity 
assigned  to  each  Indian  lease  under  the  pro  rata  system  in  force  by 
the  Magnolia  Pipe  Line  Co.  from  March  23  to  May  11,  inclusive, 
the  total  pipe-line  runs  during  that  period  from  each  lease,  and  the 
extent  to  which  the  pipe-line  runs  exceeded  or  fell  short  of  the 
quantity  which  each  lease  was  entitled  to  have  run : 


Producer  and  lease. 


JohnCarlock: 

C.  Broke  Shoulder 

Wm.  Tillis 

Coline  Oil  Co.:  Sllsaney  Jones 

Dundee  Petroleum  Co.:  Walton  Davis 
Dunn  &  Gillam:  AUie  Daney 

Total  on  Indian  leases 


Amount 
entitled 
to  be  run 
under  the 
pro  rata. 


Barrels. 
3,698.00 
3,367.00 
3,799.00 
199.00 
6,583.00 


17,646.00 


Pipe-line 
runs. 


Barrels. 
3,560.63 
3,482.79 
4,173.31 


6,520.22 


17,736.95 


Comparison  between 
pro  rata  and  pipeline 
runs. 


Over. 


Barrels. 


115.79 
374.31 


90.95 


Short. 


Barrels 
137.37 


199.00 
62.78 


For  the  computation  of  the  quantity  of  oil  each  lease  was  entitled 
to  have  run  under  the  pro  rata  system  established  by  the  Magnolia 
Pipe  Line  Co.,  the  Bureau  has  used  the  estimated  daily  capacity  ot 
the  wells  on  each  lease  in  the  above  table,  as  shown  by  the  records 
of  the  Magnolia  Pipe  Line  Co.  How  far  such  estimates  are  in 
accordance  with  the  actual  potential  output  of  each  lease,  were  wells 
allowed  to  run  to  capacity,  the  Bureau  is  not  in  a  position  to  state, 
since  it  was  not  able  to  obtain  from  the  records  of  the  producers 
operating  these  leases  definite  information  on  this  subject. 

In  view  of  the  lack  of  definite  and  trustworthy  records  concerning 
the  actual  and  the  potential  production  of  the  various  oil  properties 
in  the  Healdton  field  prior  to  May  12,  when  the  inspector  of  the 


'  .^ 


) 


< 


^ 


Oklahoma  Corporation  Commission  took  charge  of  the  prorating  of 
the  oil  to  be  run  from  each  producer,  the  Bureau  does  not  consider 
it  possible  to  determine  whether  there  was  even  a  technical  discrimi- 
nation against  the  Allie  Daney  lease.  According  to  the  Bureau's 
computations,  based  on  statements  found  in  the  Magnolia  Pipe  Line 
Co.'s  records,  there  were  during  the  period  March  23  to  May  11, 
inclusive,  42  days  when  less  oil  was  taken  from  the  lease  than  it  was 
entitled  to  under  the  pro  rata.  If  these  computations  represent  the 
actual  conditions,  there  was  a  discrimination  against  this  lease  during 
a  period  of  12  days  beyond  the  30  days  allowed  by  Oklahoma  law  for 
correcting  inequalities.  But  the  number  of  obvious  errors  encoun- 
tered by  the  Bureau  in  its  examination  of  the  Magnolia  Pipe  Line 
Co.'s  records  of  estimates  of  production,  and  also  of  stocks  on  hand 
raises  a  reasonable  doubt  as  to  the  accuracy  of  all  such  statistics.  As 
is  pointed  out  later  (see  below),  the  Bureau  believes  that  the  statistics 
of  pipe-line  runs  obtained  from  the  Magnolia  Pipe  Line  Co.'s  records 
are  to  be  relied  upon,  and  it  accepts  as  trustworthy  also  the  produc- 
tion records  of  three  producers,  as  determined  by  their  daily  gauges 
of  the  oil  produced  on  their  leases.  But  the  Bureau  considers  that 
the  Magnolia  Pipe  Line  Co.'s  estimates  of  daily  production  on  the 
leases  and  of  stocks  on  hand  on  them,  while  the  best  information  of 
the  kind  in  existence,  is  not  sufficient  to  determine  the  question  of 
discrimination,  even  were  there  no  doubts  concerning  the  construc- 
tion of  certain  features  in  the  application  of  the  law. 

Section  8.  Statistics  of  production  and  pipe-line  mns  collected  by  the 
Bureau. 

For  the  examination  of  the  question  of  discrimination  between 
producers  it  was  of  great  importance  to  secure  reliable  records  of  the 
quantity  of  oil  produced  daily  by  each  producer,  as  well  as  of  the 
quantity  taken  from  his  property  by  the  pipe  line  company.  The 
Bureau  was  successful  in  obtaining  information  which  it  considers 
trustworthy,  covering  the  quantity  taken  by  the  pipe  line  from  each 
producer  and  covering  the  quantity  produced  daily  by  three  pro- 
ducers, for  portions  of  the  period  between  January  26  and  May 
11,  inclusive.  The  information  relating  to  the  pipe-line  runs  was 
obtained  from  the  records  of  the  Magnolia  Pipe  Line  Co.  The 
information  relating  to  the  daily  production  of  the  three  producers 
was  obtained  from  the  records  of  the  Crystal  Oil  Co.,  the  Producers' 
Oil  Co.,  and  the  W.  &  F.  Oil  Co.  In  each  case  the  records  showed 
the  results  of  gauges  actually  made  of  oil  contained  in  tanlcs.  They 
do  not  show  estimates. 

The  Bureau  was  not  successful  in  obtaining  information  which  it 
considers  trustworthy  covering   the    daily    quantity    produced    by 

76568°— 15 6 


"■*«l" 


-JW 


mm 


82 


CONDITIONS  IN  THE  HEALDTON  OIL  FIELD. 


others  than  the  above-mentioned  three  producers.  It  diligently  en- 
deavored to  secure  this  information,  but  was  met  by  the  statement  of 
most  of  the  producers  that  they  had  no  records  from  which  it 
could  be  obtained.  The  information  concerning  the  daily  produc- 
tion of  producers  other  than  the  three  who  had  trustworthy  records 
was  obtained  from  the  records  of  the  Magnolia  Pipe  Line  Co.  That 
company's  field  men  reported,  from  time  to  time,  estimates  of  the 
initial  production  of  various  wells  completed  in  the  field,  estimates 
of  the  daily  quantity  being  produced  on  certain  dates  by  the  differ- 
ent producers,  and  estimates  of  the  amount  of  storage  or  "stock" 
oil  held  by  them,  on  their  leases,  pending  its  purchase  by  the  pipe 
line  company.  While  such  information  is  of  value,  in  that  in  a 
rough  way  it  gives  sufficiently  accurate  details  for  some  of  the  pur- 
poses for  which  it  was  used,  yet  the  Bureau  does  not  consider  it  suf- 
ficiently accurate  to  determine  whether  discrimination  actually  took 
place  within  the  meaning  of  the  statute.  The  Bureau  has  abundant 
evidence  showing  that  certain  of  the  estimates  of  daily  production 
and  of  stocks  on  hand  are  incorrect.  It  has  no  means  of  judging 
whether  the  others  are  correct  or  not. 

The  statistics  in  the  following  tables  must  be  considered  in  the 
light  of  the  foregoing  remarks,  and  in  any  use  made  of  them  the 
different  degrees  of  accuracy  of  the  different  kinds  of  information 
presented  must  be  taken  into  account. 

The  following  table  gives  a  statement  of  production  and  pipe- 
line runs  for  the  period  from  January  26,  when  the  pipe  line  com- 
pany began  to  purchase  and  run  oil  from  the  producers,  to  March 
22,  inclusive,  when  it  established  a  prorating  system.  All  of  the 
figures  shown  were  derived  from  records  of  the  Magnolia  Pipe  Line 
Co.,  with  the  exception  of  those  from  the  three  producers,  above 
mentioned,  who  had  trustworthy  information  concerning  their  daily 
production. 

Table  U.— PRODUCTION  AND  PIPE-LINE  RUNS,  JAN.  26  TO  MAI?.  22, 1914. 


ProducCT. 


Alma  Oil  Co 

ArdhomaOllCo 

Carlock,  John 

Crystal  Oil  Co 

Dundee  Petroleum  Co 

Dunn  &  Gillam 

Ounsburg  &  Forman  . 
Humble  Oil  Co 


Production. 


Computed  on 

basis  of  esti- 

matpd  daily 

capacity. 


Barrels. 
15,350 
10,925 

7,400 
12,490 
39,370 

4,000 
14,525 
16,520 


Computed  on 
basis  of  pipe- 
line runs  and 
stoclcsonhand. 


Barrels. 
9,461.27 

11,922.66 
3,250.24 
7,931.76 

15,372.52 


13,875.95 
11,491.94 


Taken  from 

producers' 

records  of 

actual  gauges. 


Barrels. 


9,096.38 


Pipe-line  runs. 


Barrels. 
8,779.94 
9,602.32 
2,966.70 
5,692.45 
23,642.44 


13,063.72 
14,418.12 


7  \ 


^i 


DISCRIMINATION   CHAEGES. 


83 


Table  U.— PRODUCTION  AND  PIPE-LINE  RUNS,  JAN.  26  TO  MAR.  22,  1914— Continued. 


Producer. 


Ideal  Oil  &  Gas  Co. . . . 
Maloney  Oil  &  Gas  Co 

McManOilCo 

Merrick,  F.W 

1911  Oil  &  Gas  Co 

ParaffineOilCo 

Producers'  Oil  Co 

Rex  Oil&Ref'y  Co.. 
Schennerhom,  J.  B . . . 

Twin  State  Oil  Co 

Westheimer  &  Nichols 
W.  &F.  OilCo 

Total 


Production. 


Computed  on 
basis  of  esti- 
mated daily 
capacity. 


Barrels. 

20,250 

1,800 

29,240 

800 

22,100 

8,485 

8,750 

3,040 

1,600 

6,230 

6,200 

750 


229,825 


Computed  on 
basis  of  pipe- 
line nms  and 
stocks  on  hand . 


Barrels. 

16,048.99 

1,805.67 

24,292.72 

200.22 

20,818.28 

10,236.64 

8,570.91 

2,038.31 

1,470.41 

372.50 

8,515.26 

390.98 


168  067. 13 


Taken  from 

producers' 

records  of 

actual  gauges. 


Barrels. 


9,617.52 


«  332.62 


Pipe-line  runs. 


Barrels. 

16,048.99 

1,246.77 

23,042.34 

200.22 

21,633.11 

9,523.69 

7,568.95 

2,438.31 

848.80 

1,267.50 

8,291.70 

0390.98 


170,667.05 


a  The  discrepancy  between  the  gauge  of  production  and  the  gauge  of  the  oil  run  may  be  due  to  a  mis- 
take on  the  part  of  one  of  the  gangers,  or  to  a  difference  in  the  time  the  gauges  were  taken. 

Note. — The  Bureau  considers  that  the  total  of  170,220,  obtained  by  using  the  quantities  taken  from 
the  producers'  records  of  actual  gauges  in  place  of  their  estimated  production,  based  on  pipe-line  runs  and 
stocks  on  hand,  represents  more  nearly  the  actual  conditions. 

From  the  foregoing  table  it  will  be  noted  that  the  production  for 
the  period  shown,  if  computed  on  the  basis  of  estimated  daily  ca- 
pacity, was  229,825  barrels,  and  if  computed  on  the  basis  of  pipe-line 
runs  and  stocks  on  hand,  was  108,067.13.  If  the  production  sho\Mi 
by  the  records  of  actual  gauges  be  used  instead  of  that  based  on  pipe- 
line runs  and  stocks  on  hand  for  the  three  producers  from  which  it 
was  obtainable,  the  total  production  was  170,220  barrels. 

Probably  170,220  barrels  is  the  figure  which  most  nearly  represents 
the  actual  production.  It  is  derived  from  two  sources  of  trustworthy 
information,  the  actual  tank  gauges  of  pipe-line  runs  and  of  pro- 
ducers, and  one  source,  stocks  on  hand,  where  the  information  con- 
sisted of  estimates,  the  accuracy  of  some  of  which  is  open  to  question. 
The  total  production  computed  on  the  basis  of  estimated  daily  pro- 
duction is  untrustworthy  not  only  because  of  errors  in  the  estimates 
of  the  capacity  of  the  wells  but  also  because  the  flow  of  many  of  the 
wells  was  restricted  from  time  to  time  by  the  producers,  and  there  is 
no  information  obtainable  as  to  the  periods  of  diminished  production. 

Most  of  the  producers  in  their  statements  to  the  Bureau  claimed  a 
producing  capacity  for  their  wells  in  excess  of  that  estimated  by  the 
pipe  line  company's  gauger.  Few  producers,  however,  have  any 
records  that  would  substantiate  their  claims  in  even  this  respect, 
while  records  showing  their  actual  daily  production  were  almost 
wholly  lacking. 


84 


CONDITIONS  IN   THE  HEALDTON   OIL  FIELD. 


DISCRIMINATION   CHARGES. 


85 


The  following  table  presents  a  statement  for  the  period  from 
March  23,  when  the  pipe  line  company  established  a  system  of  pro- 
rating its  purchases  from  the  different  producers,  to  May  11,  inclu- 
sive,  when  the  inspector  appointed  by  the  Corporation  Commission 
took  charge  of  the  prorating  of  production  and  pipe-line  runs  in  the 
Healdton  field. 

TABLE  12 -STATEMENT  OF  PRO  RATA  OF  PRODUCTION,  PIPE-LINE  RUNS,  AND 
OOMPARISON  OF  PIPE-LINE  RUNS  WITH  PRO  RATA  PRODUCTION,  MAR.  23  TO 
MAY  11,  1914. 


Producer. 


Adkins,  Conrad  &  Nichols. 

Alma  Oil  Co 

Ardhoma  O  il  Co 

Car  lock,  John 

ColineOilCo 

Corsicana  Petroleum  Co — 

Crosbie  &  Beatty 

Crystal  Oil  Co 

Dundee  Petroleum  Co 

Dunn  &  GUlam 

Geneva  Pearl  Oil  Co 

Ouinsburg  A  Forman 

Healdton  OH  dt  Oas  Co. . . . . 

Hernstadt,  S.J 

Humble  Oil  Co 

Ideal  01I&  Gas  Co 

Maloney  Oil  &  Gas  Co 

McManOilCo 

Merrick,F.  W 

Mutual  Beneflt  Oil  Co 

1911  Oil*  Gas  Co 

P.  &H.  Oil  Co 

ParafTme  Oil  Co 

Producers'  Oil  Co 

Rex  Oil  &  Rery  Co.  No.  1 
Rex  Oil  &  Refy  Co.  No.  2 

Schermerhom,  J.  B 

Twin  State  Oil  Co 

W.  &  F.  Oil  Co 

Westhetmer  &  Daube 

Westheimer  &  Nichols 


Pro  rata  of 
production. 


Pipe-line 
runs. 


Total. 


Barrel*. 
1,801 
10,848 
7,859 
7,065 
3.799 
3,289 
2,927 
3,690 
34,002 
6,583 
750 
5,310 
35 
6,444 
7,955 
3,758 
3,133 
14, 148 
5,866 
14,992 
10,052 
65 
3,743 
3,778 
5,318 
3,501 
6,529 
7,368 
10,145 
1,377 
3,87D 


Barrels. 
1,663.34 
9,488.37 
8,913.21 
7,043.42 
4,173.31 
3,405.16 
2,966.50 
3,821.31 

31,775.83 

6, 52a  22 

683.07 

6,644.77 


Comparison  of  pipe-line 
runs  with  pro  rata 
production. 


Over. 


Barrels. 


1,054.21 


374.31 

206.16 

39.50 

131.31 


Short. 


Barrels. 
137.66 
1,359.63 


21.58 


6,907.06 

9,599.76 

4,351.13 

3,334.34 

15,830.28 

5,495.48 

13,082.38 

11,811.05 

417. 11 

4,585.76 

4,920.49 

6,112.20 

3,658.41 

7,550.87 

5,353.15 

6,840.49 

1,755.88 

4,927.12 


1,334.77 


463.06 

1,644.76 

593.13 

201.34 

1,682.28 


2,226.17 
62.78 
66.93 


35.00 


1,759.  a*) 
352.11 
842.76 

1,142.49 
794.20 
157. 41 

1,021.87 


370.52 
1,909.62 


200,000 


203,721.47 


378.88 
1,057.12 


15,230.72 


2,014.85 
3,304.51 


11,609.25 


The  total  production  during  the  period  shown  in  the  above  table 
was  1,067,902  barrels,  using  the  estimates  by  the  pipe  line  company 
of  daily  production  and  the  actual  production  for  those  producers 
who  had  records  of  actual  gauges.     If  the  estimates  made  by  the 


r- 


I 


/ 


\ 


;> 


U 


/> 


pipe  line  be  used  for  all  producers,  then  the  total  production  would 
be  1,056,516  barrels.  The  largest  proportion  of  the  current  produc- 
tion run  on  any  one  day  was  on  March  27,  when  about  40  per  cent 
of  the  estimated  production  was  run.  The  lowest  proportion  was 
on  May  11,  when  about  11  per  cent  was  run. 

In  its  computation  of  the  quantity  which  each  producer  was  en- 
titled to  have  run  under  the  pro  rata  established,  the  Bureau  used 
the  production  as  shown  by  the  actual  gauges  for  the  quantity  pro- 
duced by  the  three  producers  from  whose  records  it  could  be  ob- 
tained, and  for  the  other  producers  it  used  the  estimated  daily 
production  of  each  lease  as  shown  in  the  records  of  the  Magnolia 
Pipe  Line  Co.  It  should  be  pointed  out,  in  connection  with  this 
table,  that  most  of  the  producers  claimed  a  producing  capacity  of 
their  wells  considerably  in  excess  of  that  estimated  by  the  pipe  line 

company's  officials. 

The  Bureau  has  evidence  that  in  the  cases  of  some  producers  the 
producing  capacity  of  their  wells  was  considerably  underestimated, 
but  it  has  clear  proof  of  this  in  only  one"  instance.  In  that  case  the 
actual  production,  as  measured  by  the  tank  gauges,  exceeded  the 
daily  production  estimated  for  the  producer  by  the  pipe-line  gauger, 
and  consequently  the  daily  pro  rata  computed  by  the  company,  on 
the  basis  of  the  ganger's  report,  was  less  than  it  should  have  been. 
In  the  other  cases  where  the  actual  production,  as  measured  by  the 
tank  gauges,  was  obtained,  the  daily  production  as  shown  by  the 
measurements  was  less  than  the  daily  production  estimated  for  these 
producers  by  the  pipe-line  gauger. 

Since  the  producers  claimed  to  have  been  compelled  to  restrict 
the  production  of  their  wells  during  this  period  because  of  the 
inability  of  the  pipe  line  company  to  take  care  of  the  current  daily 
production  of  the  field,  their  actual  production  would  not  necessarily 
be  a  measure  of  the  potential  capacity  of  their  wells.  In  the  opinion 
of  the  Bureau  they  were  entitled  to  have  the  quantity  of  oil  which 
was  taken  under  the  prorating  system  computed  on  the  basis  of  their 
potential  capacity,  not  their  actual  production.  They  had  no  records, 
however,  which  would  show  conclusively  the  potential  daily  capacity 
of  their  properties.  If  the  pipe  line  company's  estimates  of  daily 
production  were  used  in  place  of  the  records  of  actual  gauges,  the 
total  production  for  March  23  to  May  11  for  these  three  producers 
would  appear  as  86,515  barrels,  instead  of  97,900.52  barrels,  the  basis 
used  by  the  Bureau  in  the  foregoing  table. 

The  figures  of  estimated  daily  production  and  actual  production 
shown  by  tank  gauges  and  pipe-line  runs  were  tabulated  by  the 
Bureau  to  show  for  each  producer  and  lease  each  day's  production 
for  the  period  from  January  26  to  March  22,  inclusive,  the  quantity 


86 


CONDITIONS  IN  THE  HEALDTON  OIL  FIELD. 


DISCRIMINATION   CHARGES. 


87 


entitled  each  day  under  the  pro  rata  for  the  period  from  March  23 
to  May  11,  inclusive,  and  the  pipe-line  runs  on  each  day. 

According  to  these  detailed  tabulations,  which  are  not  published 
in  this  report  but  which  form  the  basis  of  Tables  10,  11,  and  12, 
there  were,  in  the  period  from  January  26  to  March  22,  inclusive, 
several  producers  for  whom  the  inequalities  in  the  quantity  they 
were  presumably  entitled  to  have  run  were  not  equalized  within  30 
days.  According  to  the  construction  placed  on  the  Oklahoma  law 
by  the  Bureau,  10  producers  may  have  been  technically  discriminated 
against  for  periods  ranging  from  3  to  26  days  beyond  the  30  days 
allowed  by  the  law  for  adjusting  inequalities.  An  examination  of 
conditions,  as  revealed  by  the  detailed  tabulations  covering  the 
period  from  March  23  to  May  11,  inclusive  (the  period  of  the  pro- 
rating system  established  by  the  pipe  line  company),  shows  that 
there  were  five  producers  who  may  have  been  technically  discrimi- 
nated against  for  periods  ranging  from  12  to  20  days. 

The  information  contained  in  the  tabulations  of  daily  estimated 
production  and  the  daily  proportion  of  the  oil  each  producer  was 
entitled  to  have  run  under  the  pro  rata  system  is  not  reliable  enough 
to  warrant  definite  conclusions  in  regard  to  discrimination  between 
the  different  producers  on  the  part  of  the  pipe  line  company. 
Furthermore,  there  is  some  doubt  concerning  the  meaning  of  the 
Oklahoma  statute,  and,  as  pointed  out  on  page  62,  the  question  of 
discrimination  in  the  legal  sense  might  hinge  on  the  judicial  in- 
terpretation of  the  law. 

Section  9.  Abandonment  of  the  discrimination  charges  at  the  Corporation 
Commission  hearings,  May  1  to  6. 

A  statement  was  made  on  May  15,  1914,  before  the  Committee  on 
Interstate  Commerce  of  the  United  States  House  of  Representatives, 
by  members  of  a  delegation  of  Oklahoma  producers,  on  the  subject 
of  discrimination  between  producers,  which  relates  to  the  Corpora- 
tion Commission  hearing  of  May  1  to  6.  W.  B.  Johnson  addressed 
the  committee  on  conditions  in  the  Healdton  field.  In  the  course  of 
his  statement  he  complained  about  the  methods  of  the  Corsicana 
Petroleum  Co.  in  continuing  to  drill  its  leases  when  there  was  an 
overproduction  in  the  field.  Representative  O'Shaunessy,  one  of  the 
members  of  the  committee,  asked  a  question,  and  the  following 
colloquy  took  place: 

Mr.  O'Shaunessy.  They  bore  a  well  on  their  land,  and  do  they  get  rid  of  the 

oil? 

Mr.  Johnson.  We  caught  them;  we  had  evidence  that  they  ran  their  pumps 
at  night  and  pumped  oil  from  their  tanks  into  the  main  line. 

Mr.  O'Shaunessy.  Into  the  pipe  lines? 

Mr.  Johnson.  Into  the  pipe  lines. 


*-- 


•4 


/ 


Mr.  O'Shaunessy.  They  can  do  that  by  secret  processes,  can  they,  without 
people  knowing  it? 

Mr.  Johnson.  We  caught  them  at  it.  Mr.  Franklin  caught  them  right  in 
the  act. 

Mr.  Franklin.  I  think  it  might  be  well  to  state  that  we  caught  them  right 
in  the  act  of  doing  this  very  thing.  Under  the  Oklahoma  law  it  is  a  felony,  and 
by  reason  of  the  fact  that  I  caught  them  in  the  act  we  were  able  to  get  this 
compromise  before  the  corporation  committee.  There  was  no  other  single  fact 
that  made  them  do  that,  because  they  were  afraid  of  the  criminal  prosecution, 
and  we  believed  that  it  was  for  the  good  of  the  country  and  for  the  good  of 
the  field ;  that  it  was  wiser  to  take  some  concessions  for  the  benefit  of  the 
whole  people  than  to  prosecute  them. 

Mr.  O'Shaunessy.  Just  what  does  that  law  state  about  that? 

Mr.  Johnson.  It  makes  it  a  felony  for  them  to  discriminate. 

Mr.  O'Shaunessy.  You  mean  for  the  pipe  line  to  discriminate  in  favor  of  one 
over  or  against  another? 

Mr.  Johnson.  Yes,  sir.  You  see  they  are  common  carriers  under  our  State 
law.  But,  you  see,  we  could  not  do  anything  for  this  reason :  They  came  into 
Oklahoma  and  took  out  a  little  charter,  $500,000  capital,  and  built  a  line  40 
miles  long  to  the  Texas  line;  then  they  called  it  the  Magnolia  Petroleum  Co.  on 
the  other  side  of  the  river  in  Texas,  so  the  extent  of  our  jurisdiction  was  only 
in  Oklahoma,  you  know.  They  very  generously  said,  "  We  will  transfer  all  the 
oil."  We  had  no  place  to  dump  it  except  into  Red  River.  [Hearings  before  the 
Committee  on  Interstate  and  Foreign  Commerce,  House  of  Representatives,  May 
15  and  16,  1914,  pp.  44,  45.] 

In  response  to  an  inquiry  from  the  Bureau  of  Corporations  to  Wirt 
Franklin,  counsel  for  the  Ardmore  Producers'  Association,  as  to  why 
other  witnesses  were  not  introduced  in  support  of  the  charge  of  dis- 
crimination at  the  Corporation  Commission  hearing  of  May  1  to  6, 
Mr.  Franklin,  under  date  of  July  20,  replied: 

*  ♦  ♦  There  was  never  any  decision  arrived  at  to  withhold  this  testimony, 
but  only  not  to  go  into  it  any  further  on  that  particular  day,  and  devote  the 
time  on  that  day  on  other  issues,  which  you  will  find  disclosed  by  the  record 
which  you  have.  It  was  intended  to  further  take  up  the  question  of  discrimina- 
tion the  next  day,  but  it  was  not  done,  the  producers  and  the  Magnolia  Pipe 
Line  Company  having  arrived  at  an  agreement,  which  agreement  was  made  the 
basis  of  the  order  of  the  Corporation  Commission  of  May  7th,  1914,  regarding 
the  Healdton  field.  As  you  perhaps  are  aware  the  Corporation  Commission 
appointed  an  Inspector  or  Umpire,  Mr.  Vernon  Calvert,  who  has  had  charge  of 
the  prorating  of  oil  since  that  time. 

Prior  to  his  appointment  there  was  great  discrimination  among  the  different 
producers,  but  since  that  time,  the  prorating  of  oil  having  been  taken  out  of 
the  hands  of  the  Pipe  Line  Company,  there  has  been  little  diflSculty. 

In  response  to  an  inquiry  from  the  Bureau  of  Corporations  to 
George  C.  Greer,  counsel  for  the  pipe  line  company,  as  to  whether 
the  agreement  was  entered  into  with  the  producers  in  order  to  avert 
any  prosecution  of  the  company  because  of  the  charges  of  discrimina- 
tion, he  stated,  under  date  of  September  16,  as  follows : 

*  *  *  it  is  absolutely  true  that  this  charge  did  not  influence  us  in  the 
slightest  in  making  the  adjustment.    I  was  prepared  to  meet  and  refute  the 


88 


CONDITIONS  IN   THE  HEALDTON   OIL  FIELD. 


charge,  <Tnd,  as  tlie  record  will  show,  I  had  begun  to  offer  evidence  on  the  sub- 
ject when  Attorney  General  West  arose  and  suggested  that  I  need  not,  or  do  not, 
(I've  forgotten  the  exact  language),  introduce  further  evidence  in  that  charge, 
and  that  the  State  would  not,  for  the  present  at  any  rate,  further  urge  it. 
^  I  then  stated  to  him  before  the  Commission  that  the  charge  was  unfounded 
and  unjust  and  I  was  prepared  to  meet  it,  and  unless  he  waived  it,  I  wanted 
to  offer  the  evidence,  and  he  was  silent.  I,  and  everyone,  I  am  sure,  present, 
construed  his  words  and  conduct  to  mean  that  the  charge  was  abandoned.  That 
all  occurred  before  I  suggested  what  we  would  try  to  do  to  relieve  the  situation, 
which  suggestion  ripened  into  the  agreement. 

As  already  stated,  the  only  instance  of  discrimination  charged  by 
the  producers  which  was  considered  at  the  Corporation  Commission 
hearing  was  that  involving  the  McMan  Oil  Co.'s  Woodworth  lease. 
The  Dundee  Petroleum  Co.  was  merely  mentioned  as  being  the  only 
other  company  which  had  a  pump  to  force  oil  into  the  pipe  line. 
Two  witnesses  were  heard  on  behalf  of  the  producers,  Messrs.  Frank- 
lin and  Jennings,  on  May  1  and  2.  One  witness  was  heard  on  behalf 
of  the  pipe  line  company,  R.  M.  McFarlin,  on  May  2.  Later  in  the 
same  day,  when  E.  A.  Latimer,  manager  of  the  Magnolia  Pipe  Line 
Co.,  was  on  the  stand,  George  C.  Greer,  counsel  for  the  pipe  line, 
started  to  question  him  on  the  subject  of  discrimination  for  the  pro- 
ducers. The  attorney  general  protested  against  going  into  the  sub- 
ject at  that  time.  The  following  colloquy*  between  Mr.  Greer  and 
Mr.  Franklin  thereupon  took  place : 

Mr.  Franklin.  We  have  about  five  witnesses  here  on  that  discrimination 
point  and  we  have  refrained  from  intnidncing  that  at  ail. 

Mr.  Greer.  They  asked  you  very  extensively  about  it. 

Mr.  Franklin.  I  know  they  did  me,  and  I  think  the  Attorney  General  con- 
cluded not  to  go  into  that  after  that. 

Mr.  Greer.  We  will  drop  that  for  the  present  then. 

At  the  beginning  of  the  afternoon  session  of  May  4,  Mr.  Greer 
made  a  statement  embodying  what  he  considered  to  be  the  best  the 
Magnolia  Petroleum  Co.  and  the  Magnolia  Pipe  Line  Co.  could  do  to 
relieve  the  situation.  In  the  course  of  this  statement  he  made  the 
following  *  reference  to  discrimination : 

Now  we  do  want  another  thing.  We  have  been  unjustly  charged  with 
intentional  discrimination.  With  the  knowledge  that  we  have  we  feel  that  is 
very  unjust.  There  has  been  no  such  purpose.  Of  course  we  don't  mean  to 
say  that  no  matter  what  day  you  take  that  you  won't  find  that  some  man  is 
getting  more  than  his  share.  That  is,  in  the  nature  of  things,  inevitable,  but 
there  has  been  nothing  but  an  honest  purpose  to  run  this  oil  fairly  between  the 
parties.  Now  we  ask  that  this  Commission  apiwint  an  inspector  or  representa- 
tive you  may  speak  of  and  we  offer  now  to  furnish  the  Commission  half  his 
expenses  and  if  the  producers  wont  furnish  the  other  half  we  will  pay  all  of  his 
expenses  not  to  exceed  $150  a  month.    We  do  this  for  our  protection  because  we 

•  Transcript  of  Corporation  Commission  hearing,  p.  175. 
^Transcript  of  Corporation  Commission  Iiearing,  pp.  289-290. 


DISCRIMINATION   CHARGES. 


89 


•  '« 


have  been  unjustly  charged  and  we  find  it  a  very  diflicult  duty  to  discharge, 
and  we  are  constantly  hearing  of  threats  that  we  are  violating  the  law  and 
that  we  are  going  to  be  penalized  for  it  when  we  are  not  violating  the  law 
and  do  not  intend  to  do  so  and  we  want  this  protection.  We  want  the  pro- 
ducers as  between  themselves  to  be  dealt  with  fairly. 

The  terms  of  Mr.  Greer's  proposition  were  discussed  at  some 
length  before  the  commission  resumed  the  hearing  of  evidence  in 
regard  to  the  refining  qualities  of  Healdton  oil.  At  the  morning 
session  on  May  5,  the  commission  was  informed  that  conferences 
among  the  producers  and  also  between  the  producers  and  the  pipe 
line  company  had  been  held  on  the  night  of  May  4,  preliminary  to 
arriving  at  some  agreement  between  the  producers  and  the  pipe  line. 

Toward  the  end  of  the  morning  session,  on  May  5,  when  Mr.  Greer 

proposed  to  introduce  the  testimony  of  the  pipe  line  company's 

gangers,  on  the  subject  of  discrimination,  the  attorney  general  again 

objected  to  going  into  the  subject,  and  Mr.  Greer  dropped  the  matter 

with  the  following  "  statement : 

Now,  General,  I  don't  want  to  be  put  in  the  attitude  of  saying  or  admitting 
that  discrimination.  We  have  done  our  best  and  we  want  it  understood  we  are 
standing  here  ready  to  defend  that  now. 

On  May  6,  after  the  agi^eement  to  have  an  inspector  appointed  to 
have  charge  of  the  prorating  of  the  oil  from  the  producers  had  been 
arranged,  the  following  colloquy  *  in  reference  to  the  charge  of  dis- 
crimination occurred  between  Commissioner  Henshaw  and  the  attor- 
ney general: 

Commissioner  Henshaw.  I  think  we  understand  the  proposition.  Can  you 
gentlemen  answer  that  by  the  10th  of  June,  and  file  your  answer  and  be  ready 
to  make  your  showing  by  that  time? 

Mr.  West.  That  is,  if  this  inspector  is  appointed  that  will  attend  to  this 
particular  complaint.  I  don't  care  particularly  about  their  answering  that 
now  unless  they  want  to. 

Commissioner  Henshaw.  You  mean  as  to  the  discrimination? 

Mr.  West.  I  will  hold  out  a  pretty  easy  pardon  on  the  discriminations  if 
they  stop.  If  they  never  existed  the  pardon  is  commutted.  If  they  did  exist 
I  am  willing  to  forget  them  forever. 

Commissioner  Henshaw.  If  they  didn't  exist  they  would  have  no  objection 
to  following  that  suggestion. 

Mr.  West.  If  they  didn't  exist  it  cannot  hurt  them. 


Section  10.  The  Bureau's  conclusions  relative  to  the  subject  of  dis- 
crimination. 

• 

The  Bureau  found  no  evidence  of  any  intent  on  the  part  of  the  pipe 
line  company  to  discriminate  between  the  different  producers  or 
against  the  oil  produced  on  Indian  allotments.    The  Bureau  did  find, 

«  Transcript  of  Corporation  Commission  hearing,  p.  366. 
*  Transcript  of  Corporation  Commission  lieariner,  p.  480, 


90 


CONDITIONS  IN    THE   HEALDTON   OIL  FIELD. 


however,  that  at  various  periods  some  producers  may  have  been 
favored  at  the  expense  of  others.  Under  the  law  the  pipe  line  com- 
pany should  either  have  taken  the  total  production  or  should  have 
prorated  its  purchases  and  equalized  them  within  30  days.  In  the 
case  of  most  of  the  producers  temporary  inequalities  were  apparently 
corrected  within  the  legal  period.  The  unreliability  of  existing  rec- 
ords relating  to  production  and  the  unsettled  question  as  to  what 
legally  constitutes  discrimination  preclude  a  positive  statement  in 
regard  to  the  subject. 


« ■. 


EXHIBITS. 


Exhibit  1. 

ORDER  OF  THE  CORPORATION  COMMMISSION  OF  OKLAHOMA,  PRE- 
SCRIBING REGULATIONS  GOVERNING  THE  HEALDTON  FIELD. 


CORPORATION  COMMISSION  OF  OKLAHOMA. 


Obdeb  No.  814 


Cause  No.  2041 


State  of  Oklahoma,  PlaintiflF, 
vs. 
Magnolia  Pipe  Line  Company,  a  corporation, 
The  Oklahoma  Pipe  Line  Company,  a  corporation. 
The  Gulf  Pipe  Line  Company,  a  corporation. 
The  Prairie  Oil  &  Gas  Company,  a  corporation. 
The  Texas  Company,  a  corporation,  Defendants. 

Appearances  : 

For  the  PlaintiflP:  Chas.  West,  Attorney  General. 

For  the  Producers:  W.  B.  Johnson. 

For  the  Defendants:  Geo.  C.  Greer  and  A.  C.  Cruce. 


y 


y 


By  the  Commission: 

The  complaint  in  this  case  was  filed  by  the  Attorney  General  on  behalf  of  the 
State  of  Oklahoma,  and  alleged  in  substance  that  the  defendants  were  engaged 
in  a  public  business  of  transporting  and  purchasing  oil  as  common  carriers  and 
common  purchasers ;  that  it  was  the  duty  of  the  defendant  to  pay  a  reasonable 
price  for  crude  oil  and  to  take  the  same  from  all  producers  without  discrimina- 
tion; that  this  duty  had  been  violated  and  that  they  were  paying  a  less  price 
than    the    value   of    the   oil    and    that    they    were    discriminating    in    prices. 

During  the  hearing,  it  was  suggested  by  the  Commission  that  the  parties  in- 
terested, the  producers  and  the  Magnolia  Pipe  Line  Company,  should  confer 
with  a  view  of  reaching  a  basis  or  understanding  upon  which  the  business  for 
tlie  present  could  be  conducted.  As  a  result  of  this  conference  a  tentative 
agreement  was  submitted  to  the  Commission  which  provides  in  substance  that 
within  one  week  the  Magnolia  Pipe  Line  Company  shall  begin  to  take  an  average 
of  eight  thousand  barrels  of  oil  from  the  Healdton  field  daily ;  that  on  or  before 
July  the  1st,  1914,  it  shall  begin  to  take  a  daily  average  of  not  less  than  twelve 
thousand  barrels  per  day ;  that  beginning  October  the  1st,  1914,  if  market  condi- 
tions justify,  it  may  take  a  greater  amount  than  twelve  thousand  barrels  per 
day;  and  that  the  taking  of  Healdton  crude  from  the  producers,  if  offered  by 
them,  in  quantities  as  above  indicated  is  to  continue  until  April  1st,  1915,  and 
as  much  longer  as  market  conditions  justify ;  and  providing  that,  the  agreement 
of  the  Pipe  Line  Company  is  not  to  be  construed  as  having  been  violated  if  it  is 
temporarily  prevented  from  performing  the  same  by  strikes,  fires,  floods  or  other 

91 


I  ,^. 


I  ' 


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92 


CONDITIONS  IN   THE   HEALDTON   OIL  FIELD. 


causes  over  which  it  has  no  controL  It  is  also  provided  by  said  agreement  that 
if  the  price  of  oil  should  be  fixed  hereafter  without  the  consent  of  the  Pipe  Line 
Company  it  shall  not  thereafter  be  further  bound  to  take  oil  under  the  agree- 
ment ;  that  the  Magnolia  Pipe  Line  Company  shall  take  four  55000  barrel  tanks 
heretofore  purchased  by  the  certain  members  of  the  Ardmore  Oil  Producers 
Association  and  pay  said  members  the  cost  therefor  and  erect  them  in  the 
Healdton  field,  to  be  immediately  used  by  the  Magnolia  Pipe  Line  Company  to 
clear  the  leases  of  all  stock  of  accumulated  oil  that  is  in  a  merchantable  con- 
dition the  owners  of  said  oil  to  be  paid  for  same  upon  delivery  at  the  rate  of 
fifty  cents  per  barrel  for  quantities  delivered.  It  is  also  provided  that  the 
Commission  may  relieve  the  Pipe  Line  Company  from  the  necessity  of  connect- 
ing with  any  new  wells  within  six  month  from  date  hereof,  except — 
First :  Those  necessary  to  meet  existing  offsets ;  and, 

Second:  Those,  the  drilling  of  which  is  made  necessary  because  of  lease  con- 
ditions, unless  said  Pipe  Line  Company  shall  sooner  elect  to  take  the  entire 
production  from  the  Healdton  field. 

It  is  further  provided  that  should  any  dispute  arise  as  to  what  wells  should 
be  connected,  the  President  of  the  Ardmore  Oil  Producers  Association  is  made 
the  umpire  to  determine  said  question  with  the  right  of  any  party  aggrieved 
to  appeal  to  the  Board  of  Directors  of  the  Ardmore  Oil  Producers  Association 
whose  decision  shall  be  final ;  and  that  the  President  of  said  Association  shall 
have  authority  to  make  such  exceptions  to  the  rule  as  Justice  and  equity  among 
the  different  producers  of  the  field  may  require  and  that  said  Association  and 
Its  officers  shall  act  for  any  producer  not  a  member  of  the  Association  in  this 
behalf;  all  oif  which  regulation  is  subject  to  the  right  of  any  party  to  resort 
to  the  Corporation  Commission  or  the  Courts  for  further  relief. 

Said  agreement  further  provides  that  the  defendant,  the  Magnolia  Pipe  Line 
Company,  is  to  provide  connection  and  loading  facilities  at  or  near  Addington, 
Oklahoma,  on  the  main  line  of  the  Chicago,  Rock  Island  &  Pacific  Railway 
Company,  and  to  establish  a  reasonable  rate  for  the  transportation  of  oil  from 
the  HeJildton  Oil  Field  to  said  point,  and  to  transport  oil  when  offered  in  car- 
load lots. 

The  stipulation  also  contains  a  provision  in  reference  to  the  testing  of  oil 
in  the  Healdton  Field  and  for  the  appointment  of  an  inspector  by  the  Commis- 
sion at  a  salary  not  to  exceed  $150.00  per  month,  one  half  of  which  is  to  be 
paid  by  the  Magnolia  Pipe  Line  Company  and  the  other  one  half  by  the  pro- 
ducers. 

The  Attorney  General  objected  to  the  provision  in  the  tentative  agreement 

which  provided :  "  if  hereafter  the  price  of  said  oil  is  fixed  without  the  consent 
of  the  said  Pipe  Line  Company,  it  shall  not,  thereafter,  be  further  bound  to 
take  oil  under  this  agreement." 

The  Pipe  Line  Company  objects  to  entering  into  an  agreement  whereby  it 
is  required  to  take  any  stipulated  amount  of  oil  unless  it  is  free  to  voluntarily 
fix  the  price  thereof,  and  as  we  understand,  it  will  not  consent  to  any  stipula- 
tion which  may  be  construed  as  an  agreement  of  record  or  as  a  contract  con- 
taining requirements  to  that  effect. 

The  Attorney  General  will  not  agree  upon  behalf  of  the  State  to  waive 
directly  or  indirectly,  any  rights  the  State  may  have  or  to  compromise  said 
rights  which  may  be  construed  to  be  on  a  basis  of  bargain  and  sale. 

The  resr)ectlve  parties  agree  that  an  order,  substantially  as  follows,  will  be 
acceptable  to  all  Interested  parties. 

It  is  hereby  ordered  that  the  defendant,  the  Magnolia  Pipe  Line  Company, 
shall,  within  one  week  from  May  the  5th,  1914  begin  taking  a  dally  average  of 


EXHIBITS. 


93 


0 


**  J 


\ 


eight  thousand  barrels  of  oil  from  the  Healdton  Field  and  on  or  before  July  the 
Ist,  1914,  and  until  April  the  1st,  1915,  shall  not  take  less  than  a  dally  average 
of  twelve  thousand  barrels  of  oil  from  said  field,  and  shall  immediately  erect 
fow  55000  barrel  steel  tanks  in  the  Healdton  Oil  Field,  and  that  in  addition 
to  the  daily  averages  of  oil  above  mentioned  it  shall,  as  per  said  agreement, 
clear  the  leases  of  all  stock  of  accumulated  oil  which  is  in  a  merchantable  con- 
dition and  pay  the  owners  of  same  upon  delivery  at  the  rate  of  fifty  cents  per 
barrel  for  quantities  delivered. 

The  Magnolia  Pipe  Line  Company  is  hereby  relieved  as  a  common  purchaser, 
from  the  necessity  of  connection  with  any  new  wells  within  six  months  from 
the  date  of  this  order,  except — 

First :  Those  necessary  to  meet  existing  offsets ;  and. 

Second:  Those,  the  drilling  of  which  is  made  necessary  because  of  lease 

conditions. 

Third:  Those  who  have  leases  and  no  producing  wells  should  be  permitted 
to  connect  up  with  one  or  two  wells  within  the  six  months. 

Fourth :  All  parties  should  be  permitted  to  drill  wells  and  connect,  which  in 
Justice  and  equity  should  be  done,  based  on  the  following  considerations : 

Where  lease  owners  or  lease  holders  have  property  which  may  be  drained 
by  the  producing  wells  although  there  may  be  no  wells  in  the  immediate  vicin- 
ity of  such  property ;  also  in  cases  where  contracts  have  heretofore  been  made 
for  drilling  or  the  financial  condition  of  the  parties  interested  may  be  such 
that  bankruptcy  would  necessarily  result  if  the  properties  were  tied  up  for  six 
months  or  longer  before  connections  could  be  made. 

These  things  must  be  considered  and  no  injustice  or  inequity  must  be  done 
any  one.  Yet,  the  principle  of  limiting  the  development  so  as  to  prevent  waste 
of  oil  should  be  preserved  and  in  so  doing  it  may  be  necessary  for  all,  to  sus- 
tain some  inconvenience.  Should  the  Pipe  Line  Company  sooner  elect  to  take 
the  entire  production  from  the  Healdton  Field,  the  above  requirement  shall 

become  null  and  void. 

It  is  further  ordered,  that  the  Magnolia  Pipe  Line  Company  shall  provide  at 
Its  own  expense,  a  pipe  line  connection  and  loading  facilities  at  or  near  Ad- 
dington, Oklahoma,  on  the  main  line  of  the  Chicago,  Rock  Island  &  Pacific 
Railway  Company  and  establish  a  reasonable  rate  per  barrel  for  the  transpor- 
tation of  oil  from  the  Healdton  Field  to  said  point,  when  offered  for  such 
transportation  in  carload  lots. 

It  is  suggested  that  the  President  of  the  Ardmore  Oil  Producers  Association 
be  made  the  umpire  to  settle  all  disputes  as  to  which  wells  shall  be  connected, 
and  shonld  any  party  or  parties  insist  upon  being  connected  to  the  pipe  line 
who  may  be  excluded  under  the  above  conditions,  he  or  they,  shall  apply  to 
the  Commission  for  a  modification  of  this  order. 

This  order  shall  remain  in  full  force  and  effect  until  April  the  1st,  1915,  and 
In  the  meantime  the  Investigation  as  to  quality,  value  and  price  to  be  paid  for 
oil,  may  continue.  But  should  the  Commission,  during  the  life  of  this  order 
Issue  an  order  fixing  the  price  of  oil  in  the  Healdton  field,  this  order  will  be- 
come void,  upon  the  effectiveness  of  such  order  fixing  prices. 

Vem  Calvert  Is  hereby  appointed  as  an  insi)ector  in  the  Healdton  Oil  Field, 
with  full  authority  to  investigate  all  runs  of  oil,  investigate  the  production  of 
all  wells  and  the  amount  of  oil  which  should  be  taken  from  each  producer,  so 
as  to  prevent  any  discrimination  and  shall  immediately  advise  the  pipe  line 
company  of  his  conclusions,  which  shall  be  in  writing,  and  a  copy  of  which 
shall  be  sent  to  the  Commission;  and  upon  the  failure  of  the  pii^e  line  com- 
pa^iy  to  so  take  oil  from  the  different  producers,  the  said  inspector  shall  imme- 


94 


CONDITIONS  IN   THE  HEALDTON   OIL  FIELD. 


diately  notify  the  Corporation  Commission,  and  should  any  party  feel  ag- 
grieved in  that  a  just  proportion  of  his  oil  is  not  being  taken  under  the  above 
arrangement,  he  shall  immediately  report  the  same  to  the  Commission.  Said 
inspector  is  appointed  upon  the  condition  contained  in  the  agreement  that  his 
salary  should  be  fixed  at  $150.00  per  month,  one  half  of  which  is  to  be  paid  by 
the  producers  and  one  half  by  the  Magnolia  Pipe  Line  Company,  and  that  in 
no  event  should  the  State  become  liable  for  any  portion  of  his  salary  or  ex- 
penses; and  that  said  inspector  is  appointed  upon  request  and  recommendation 
of  the  oil  producers  in  the  Healdton  Field. 

CoRPOBATioN  Commission. 

J.  E.  Love,  Chairman. 

Geo.  a.  Henshaw,  Commissioner, 


Attest : 


J.  H.  Hyde,  Secretary, 
Oklahoma  City,  May  7,  191J^, 


Exhibit  2. 

REPORT  ON  THE  GRAVITY  AND  GENERAL  CHARACTERISTICS  OF 
HEALDTON,  OKLA.,  CRUDE  OIL  BY  H.  L.  WOOD  FOR  THE  COR- 
PORATION COMMISSION  OF  OKLAHOMA,  MARCH  13,  1914. 

Hon.  Geobge  A.  Henshaw, 

Commissioner, 
In  compliance  with  your  instructions,  I  have  made  an  investigation  of  the 
conditions  existing  in  the  oil  field  in  Carter  County,  commonly  known  as  the 
Healdton  field,  and  submit  a  summary  of  those  conditions,  including  a  gravity 
test  of  the  crude  produced  from  practically  every  property,  the  crude  tested 
coming  fresh  from  one  or  more  wells  on  each  lease,  from  flow  tanlis,  storage 
tanks  and  sump  holes.  The  object  sought  in  taking  the  gravity  was  partly  to 
determine  the  i)er  cent  of  deterioration  of  the  crude  after  exposure  to  the  air, 
as  much  of  the  production  of  the  field  has  been  held  in  tanks  some  days  await- 
ing completion  of  the  pipe  line  and  the  storage  tanks  of  the  pipe  line  company. 

GRAVITY  TESTS  OF  WELLS  AND  TANKS. 

Parafflne  Oil  Company.— Forty  acres  In  section  8,  township  4,  range  3, 
Carter  County ;  two  wells  completed,  one  1,040  feet  and  one  1,103  feet  deep,  one 
flowing,  one  pumping;  sample  taken  from  flow  tanks  from  which  the  oil  is 
run  into  the  pipe  line,  the  crude  taken  within  24  hours  after  coming  from  the 
well.  Hydrometer  reading,  34J  degrees  Baum6,  temperature  48  degrees  Fahren- 
heit; corrected  gravity,  32.9  degrees. 

Twin  State  Oil  Company.— Arrington  land,  well  No.  2,  section  8-4^;  depth 
of  well  943  feet ;  sample  taken  from  flow  tank  which  daily  runs  are  made. 
Hydrometer  reading,  31i  degrees,  temperature  46  degrees;  corrected  gravity 
32.8  degrees.  Sample  taken  48  hours  old;  hydrometer  reading,  31^  degrees- 
temperature,  46  degrees;  corrected  gravity,  32.4  degrees. 

1911  Oil  Company.— WoodwoTth  land,  section  32-3^;  well  No.  1,  1,120  feet 
deep;  hydrometer  reading,  30.9  degrees,  temperature  61  degrees-  corrected 
gravity,  30.9  degrees.    Well  No.  2,  top  of  sand  1,057  feet,  bottom  of  hole  1,117.6; 


%■» 


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^i 


A 


> 


EXHIBITS. 


95 


hydrometer  reading,  31.4  degrees,  temperature  60  degrees — normal — corrected 
gravity,  31.4  degrees.  Sample  taken  from  1,600-barrel  tank  30  days  old;  tem- 
perature 49  degrees,  corrected  gravity,  29.7  degrees.  Sample  taken  from  ground 
reservoir  90  days  old  in  open  air;  temperature  48  degrees;  gravity,  21  degrees. 

McMan  Oil  Company. — Woodworth  land,  section  32-3-3;  No.  1  well,  hydrom- 
eter reading  33.6  degrees,  temperature  52  degrees;  corrected  gravity,  34.1 
degrees.  Well  No.  2,  hydrometer  reading  33.7,  temperature  52  degrees;  cor- 
rected gravity,  34.1  degrees.  Top  of  sand  840  feet,  bottom  of  hole  875  feet. 
Initial  production,  1,800  barrels,  now  making  1,200  barrels. 

Ideal  Oil  Company. — Scoggins  land,  section  32-3-3;  well  No.  1,  955  feet 
deep,  initial  production  1,000  barrels,  now  making  450  barrels.  Hydrometer 
reading,  34.1  degrees,  temperature  54  degrees;  corrected  gravity,  34.5  degrees. 

Producers  Oil  Company. — N.  E.  Dawson  land,  section  32-3-3;  well  No.  1, 
top  of  sand  1,035  feet,  bottom  1,088  feet,  production  400  barrels.  Hydrometer 
reading,  30.6  degrees;  temperature,  53  degrees;  corrected  gravity,  31  degrees. 

Gunsburg  d  Forman. — Westheimer  &  Daube  land,  section  9-4-3;  well  No.  1, 
1,010  feet  deep,  production  300  barrels.  Hydrometer  reading,  32.6  degrees; 
temperature  61  degrees;  corrected  gravity,  32.6  degrees. 

Red  River  Oil  Company. — The  discovery  well  of  the  field  was  Franklin  No.  1, 
Franklin  land,  section  5-^-3,  in  the  900  foot  sand,  initial  production  270  bar- 
rels. A  sample  of  oil  from  this  well  could  not  be  secured,  but  a  sample  was 
taken  from  tanks  into  which  Nos.  1,  2,  3,  4  and  5  wells  are  flowing,  the  gravity 
showing  on  an  open  reading  of  the  hydrometer  31.1  degrees,  the  temperature 
registered  at  49  degrees.  Fresh  from  the  well  No.  1  showed  an  open  hydrom- 
eter reading  of  32.1, 

Crystal  Oil  Company. — This  company's  lease  in  section  5-4-5,  about  the 
center  of  the  field,  has  two  gas  wells  completed,  one  registering  approximately 
50,000,000  cubic  feet  volume  and  275  pounds  pressure.  The  oil  well  has  con- 
siderable gas  coming  with  the  oil.  A  sample  taken  from  the  tank  holding 
crude  gravitied  from  the  flow  tank,  a  week  old,  showed  a  temperature  of  60 
degrees  (normal)  and  a  specific  gravity  of  29.8  degrees. 

Humble  Oil  Company. — J.  C.  Smith  land,  section  4-4-3,  gravity  30.9  degrees; 
No.  1  in  section  9-4-3,  32.4  gravity;  C.  R.  Smith  land,  section  9-4-3,  31.3  de- 
grees gravity. 

Ardhoma  Oil  Company.— Section  9-4-3,  No.  1  well  shows  a  gravity  of  33.4 
degrees. 

Rex  Oil  Company. — Hicks  No.  1,  section  9-4-3,  31.4  degrees  gravity. 

Westheimer  &  Nichols. — C.  R.  Smith  land,  section  9-4-3,  29.6  gravity  after 
standing  several  days. 

Twin  State  Oil  Company. — Bess  Tucker  land,  section  36-3-4,  Jefferson 
county,  the  western  well  of  the  field,  was  being  tubed  and  a  sample  could  not 
be  obtained,  but  an  unoflicial  test  showed  a  gravity  between  29  and  30  degrees. 

PIPE  LINE  AND  STORAGE  TANKS. 

The  crude  of  varying  gravities  is  all  run  into  the  storage  tanks  of  the  pipe 
line  company  at  its  pumping  station,  an  open  test  of  which  showed  a  gravity 
of  31  degrees.  The  crude  thus  mixed,  when  started  into  the  pipe  line  for 
pumping  south  into  the  main  line  in  Texas  and  on  south  gets  away  at  a  gravity 
shading  under  31  degrees  Baum6. 

At  the  date  of  tanking  the  temperature  and  specific  gravity  tests  in  the  Heald- 
ton field  approximately  half  of  the  production  of  the  field  takes  the  $1.05 


96 


CONDITIONS  IN   THE  HEALDTON  OIL  FIELD. 


price  and  half  of  It  is  under  32  degrees  gravity  and  talces  the  70  cent  price. 
The  pipe  line  ganger  takes  an  open  hydrometer  reading  for  temperature  and 
gravity,  indicated  on  the  run  tickets  where  it  is  below  32  degrees,  and  the 
corrected  gravity  according  to  the  manual  is  computed  by  the  office  force  of 
the  pipe  line  company  and  each  producer  is  credited  accordingly,  which  is 
the  only  practical  manner  of  taking  tests  and  computing  the  price,  and  is 
satisfactory  and  customary  where  the  gravity  basis  is  adopted,  a  representative 
of  the  producer  being  present  when  the  gauge  and  test  are  made  and  entered 
on  the  run  ticket 

■UPEBFICIAL  BATING  OF  THE   QUALITY. 

Only  a  refinery  run  test  or  a  chemical  analysis  of  the  crude  oil  produced  in  the 
Healdton  field  can  exactly  determine  the  exact  value  of  the  crude,  but  the 
hydrometer  tests  made  from  the  crude  fresh  from  the  wells,  from  crude  after 
standing  in  tanks  from  24  to  48  hours  and  after  it  has  stood  seven  to  ninety 
days  indicate  that  the  oil  lacks  vitality  and  that  it  goes  to  pieces  very  rapidly, 
meaning  that  the  specific  gravity  drops  quickly  until  the  volatile- ingredients 
are  lost,  leaving  it  rather  dead,  thick  and  sticky.  There  is  very  perceptible 
sulphur  odor  noticeable  over  the  field,  like  the  heavy  cr'udes  produced  in  Texas, 
Louisiana,  Mexico  and  California— the  so-called  fuel  oils  of  commerce;  a  few 
of  the  wells  showing  lighter  gravities  give  off  a  sweet  odor,  like  most  of  the 
regular  refining  crudes.  These  superficial  data  also  indicate  that  the  Healdton 
production  can  easily  be  rated  as  a  fuel  oil  in  contradistinction  to  a  refining 
oil,  as  even  the  lighter  gravity  crude  appears  to  deteriorate  very  quickly  after 
being  brought  to  the  surface  and  undergoing  the  handling  from  tank  to  tank 
and  moving  through  the  lines.  When  exposed  to  the  air  it  thickens  and  gets 
sticky. 

A  very  noticeable  feature  of  the  field  Is  the  abnormally  low  temperatures  of 
the  crude  as  it  comes  from  the  wells,  registering  as  low  as  46  degrees  Fahrenheit, 
ranging  up  to  48,  52,  54  and  62  degrees,  only  two  of  the  samples  tested  regis^ 
tering  the  normal  temperature  of  60  degrees,  two  61  degres  and  one  64  degrees. 
Superficially  this  low  temperature  Indicates  a  lack  of  kerosene,  naphtha  and 
gasoline,  which  give  the  vitality  to  crude  oil,  their  absence  creating  the  density 
of  the  fluid  which  makes  fuel  olL 

The  heavy  gas  of  the  field  appears  to  be  in  the  center  of  the  present  pro- 
ducing area  and  it  partakes  somewhat  of  the  characteristics  of  the  crude  oil 
from  which  it  rises,  but,  lacking  an  analysis  for  heat  units,  its  comparative 
value  cannot  here  be  approximated. 

DEVELOPMENT   OF    THE    FIELD. 

As  it  Stands  on  this  date,  the  producing  area  is  located  in  section  5,  section  4, 
section  8,  section  9  and  section  32,  in  the  northwest  portion  of  Township  4 
south  and  Range  3  west,  Carter  County,  section  32  being  in  the  southwest 
corner  of  Township  3  south  and  range  3  west;  the  one  well  in  Section  36, 
Township  3  south  and  Range  4  west  being  just  over  the  line  in  Jefferson 
County. 

On  this  date  47  wells  have  been  completed,  37  of  them  producing  oil,  four 
producing  gas,  and  six  of  them  are  dry.  The  daily  production  is  approximately 
6,800  barrels.  There  are  43  wells  drilling  and  37  rigs  up  and  building  waiting 
for  tools  to  be  released  from  drilling  wells. 


I 

( 


EXHIBITS. 


> 


\ 


i 


M 


I 


97 


The  Magnolia  Pipe  Line  Company  has  two  55,000  barrel  steel  tanks  full  of 
oil  and  is  getting  its  pumping  station  adjusted,  having  pumped  5,000  barrels 
through  the  line  in  24  hours.  This  pipe  line  is  six  inch  from  the  pump  sta- 
tion located  in  section  3-4-3,  east  of  the  field,  to  Addington,  a  distance  of  26 
miles,  and  from  there  to  its  junction  with  the  main  line  in  Texas,  near  Bowie, 
Texas,  is  eight-inch.  The  normal  capacity  of  the  six  inch  line  is  16,000  barrels 
every  24  hours,  but  the  initial  station  as  above  would  be  pushed  to  handle  that 
much  regularly  every  24  hours  a  distance  of  60  miles. 

The  Magnolia  Petroleum  Company  of  Texas,  operating  the  trunk  line  from 
Electra  to  Beaumont,  has  one  eight-inch  line,  is  about  completing  three  addi- 
tional pumping  stations,  and  is  running  regularly  11,000  barrels  a  day  from 
Electra.  This  crude  being  of  a  fine  refining  grade,  it  will  be  given  the  prefer- 
ence over  the  heavier  and  less  valuable  crude  from  the  Healdton  field,  which 
means  that  the  six  inch  line  out  of  the  Carter  County  field  has  a  maximum 
carrying  capacity  against  the  Texas  main  line  of  not  to  exceed  9,000  barrels  in  24 
hours,  with  the  regular  quantity  handled,  as  at  present  situated,  rather  under 
that  figure. 

Anticipating  a  congestion,  the  Magnolia  Pipe  Line  Company  (an  Oklahoma 
corporation),  on  Thursday,  March  12,  and  several  days  before  that  date,  noti- 
fied the  producers  in  the  Healdton  field  that  their  production  would  be  handled 
on  a  pro  rata  basis  according  to  the  average  quantity  produced  from  each  lease, 
to  be  adjusted  from  time  to  time  as  the  production  of  the  field  increased.  This 
means  that  oil  will  stand  in  tanks  for  varying  periods,  only  a  portion  of  their 
contents  being  run  each  day.  This,  in  turn,  means  that  the  contents  of  the 
tanks  will  lose  in  gravity  and  much  of  it  fall  below  the  32  degree  line  between 
$1.05  and  70  cents.  It  means  that  wells  will  have  to  be  shut  in,  reducing  their 
production. 

It  is  apparent  at  this  time  that  the  production  of  the  Healdton  field  is  likely 
to  reach  12,000  barrels  within  30  days,  which  means,  as  the  pipe  line  facilities 
now  stand,  a  surplus  of  3,000  to  5,000  barrels  a  day,  that,  by  standing,  will 
deteriorate  and  lose  part  of  its  initial  value. 

Relations  between  the  producers  and  the  piping  and  purchasing  company  are 
becoming  strained  and  will  become  more  so  as  the  field  grows  and  the  con- 
gestion and  consequent  shrinkage  of  value  goes  on.  All  crude  oil  produced  at 
Electra  and  Petrolia,  Texas,  60  to  100  miles  southwest  of  the  Carter  county 
field,  is  sold  for  $1.05  per  barrel.  All  of  the  crude  produced  in  Oklahoma  and 
Kansas,  outside  of  the  Healdton  field,  is  q.uoted  at  $1.05.  All  of  the  heavy  and 
fuel  grades  of  crude  produced  in  southwest  Texas  and  southwest  Louisiana  are 
quoted  at  from  90  cents  to  $1.05  per  barrel,  most  of  it,  as  a  matter  of  fact, 
selling  at  $1.06  to  $1.08  under  contract.  Crude  produced  in  the  Caddo  field  in 
northwest  Louisiana  is  bought  on  foar  grades — "crude"  75  cents;  32  gravity 
90  cents;  35  gravity  95  cents  and  38  gravity  and  better  $1.05.  A  little  crude 
at  Corsicana,  Texas,  is  bought  on  two  grades — "  heavy  "  70  cents,  "  light "  or 
38  gravity  at  $1.05.  Comparisons  are  made  between  these  contiguous  fields 
and  their  crudes  and  the  Healdton  field,  the  Healdton  producers  urging  against 
the  pipe  line  company  that  Healdton  is  being  discriminated  against  both  in 
price  and  the  quantity  of  the  production  that  is  taken. 

I  believe  that  the  facts  and  statements  herein  set  out  cover  the  situation  now 
existing  in  the  Healdton  oil  field,  which  I  herewith  submit. 
Respectfully, 

H.  L.  Wood. 
Oklahoma  City,  Okla.,  March  13,  1914, 
76568"— 15 7 


; 


98 


CONDITIONS  IN  THE  HEALDTON  OIL  FIELD. 

Exhibit  3. 


AFFIDAVIT  OF  F.  V.  FAULKNER  RELATING  TO  EARLY  CONDITIONS 

IN  THE  HEALDTON  FIELD. 

State  of  Texas       1 
County  of  Dallas  j 

F.  V.  Faulkner,  being  duly  sworn,  says:  I  am  Vice  President  and  General 
Superintendent  of  Corsicana  Petroleum  Company  and  in  charge  of  the  drilling 
and  operating  of  oil  wells  and  securing  of  leases  and  oil  territory.    On  August 
19th,  1913,   I   left  Wichita   Falls,  Texas,   with  L.   Campbell,  an  employe  of 
Corsicana  Petroleum  Company,  in  an  auto.    We  travelled  to  Waurika,  Okla- 
homa on  that  day.    On  August  20th  we,  together  with  Wm.  Goodman,  another 
employe,  went  in  the  auto  to  the  Red  River  Oil  Company  well,  the  first  pro- 
ducing well  drilled  in  the  Healdton  field.     We  met  Mr.  W.  Franklin  there, 
also  Mr.  Critchelow  (Jr.),  the  latter  in  charge  of  the  property  and  who  gave 
us  permission  to  get  a  bottle  of  the  oil.    I  filled  a  quart  bottle  from  the  well 
while  pumping.    We  spent  two  or  three  hours  at  the  well.    Several  other  Com- 
panies had  representatives  at  the  well  at  that  time.    They  had  had  oil  at  the 
well  about  two  weeks,  and  on  this  day  they  had  the  well  pumping.    I  inquired 
of  Mr.  Franklin  in  regard  to  how  the  land  on  which  the  well  was  located  was 
held,  also  surrounding  lands.     Mr.  Franklin  informed  us  that  his  Company, 
the  Crystal   Oil  Company,  had  held  about  5,000  acres  under  ownership  and 
oil  lease  in  that  neighborhood  and  had  assigned  to  Red  River  Oil  Company 
half  of  the  acreage  for  the  consideration  of  drilling  a  well.    The  acreage  thus 
given  was  scattered  quite  extensively.    It  was  my  understanding  that  the  par- 
ticular tract  on  which  the  well  was  located  was  owned  in  fee  by  Apple  and 
Franklin,  and  was  leased  by  them  in  whole  or  in  part  to  Crystal  Oil  Company 
and  lease  assigned  among  other  leases  to  Red  River  Oil  Company  for  drilling 
as  above  stated.    Mr.  Franklin  stated  the  Crystal  Oil  Company  had  other  lands 
under  lease  in  the  immediate  vicinity  and  we  talked  with  him  about  our  se- 
curing territory  from  them.    Their  terms  for  an  outright  assignment  were  far 
beyond  our  ideas  of  value,  but  we  thought  we  might  get  together  on  some- 
thing in  the  nature  of  a  partnership  where  we  would  furnish  the  money  and 
take  the  risk  of  loss  and  divide  the  profits.     We  came  to  no  conclusions  on 
that  date  and  made  no  offers  but  left  the  matter  open  for  future  negotiations. 
On  two  or  three  occasions  after  this  and  before  September  5th,  1913,  Mr. 
Campbell  interviewed   Mr.   Franklin   and  other  members  of  the  Crystal  Oil 
Company  and  on  September  6th,  1913,  Messrs.  L.  Campbell  and  W.  L.  Nelll. 
another  employe,  and  myself  had  a  conference  with  the  Crystal  Oil  Company 
in  Ardmore.     They  represented  that  they  had  under  lease  about  2,300  acres, 
one-half  of  which  they  proposed  to  assign  to  us  retaining  a  one-half  interest  in 
the  portion  thus  assigned.    We  were  to  furnish  all  money,  supplies,  labor  and 
to  operate  the  property,  giving  them  half  of  the  profits  and  a  cash  bonus  In 
hand  of  about  $10,000,  which  we  were  willing  to  do;  but  an  additional  con- 
sideration guaranteeing  to  them  a  profit  equal  to  one-fourth  of  the  gross  pro- 
duction (after  royalty  deducted)  as  asked  by  them  made  much  more  of  a  con- 
sideration than  we  were  willing  to  concede,  and  the  negotiations  closed  on  that 
date    September  6th,  1913,  and  we  have  had  no  negotiations  with  them,  that 
I  know  of,  since.    The  quart  bottle  of  oil  spoken  of  above,  I  gave  to  Messrs. 
E  R.  Brown  and  D.  C.  Stewart  within  the  next  day  or  two.    I  have  had  nothing 
to  do  with  the  getting  of  any  oil  from  the  well,  except  this  one  quart,  at  any 


A 


EXHIBITS. 


99 


time.     I  did  not  test  that  sample,  nor  have  I  ever  had  any  of  the  Healdton 
oil  tested. 

They  looked  at  the  oil  and  smelled  it  and  stated  that  it  seemed  similar  to 
Electra  oil.  Several  weeks  afterward  I  inquired  from  D.  C.  Stewart  as  to 
the  gravity  of  Healdton  oil.  He  stated  that  it  was  38  gravity.  I  after- 
wards heard  it  reported  that  the  gravity  was  34.  This,  I  think,  was  several 
weeks  after  the  above.  The  first  chemical  or  refinery  test  I  heard  of  was  about 
March  1st,  1914,  when  Mr.  Brown  called  me  into  his  office  and  asked  me  if  I 
knew  that  Healdton  oil  showed  only  about  30  or  31  gravity  (I  cannot  remember 
which  now),  also  that  it  was  not  a  good  quality  for  refining  and  virtually 
only  a  fuel  oil.  I  told  him  that  was  news  to  me,  as  I  had  thought  the  oil 
was  a  better  quality  than  that,  although  my  knowledge  was  limited  to  the 
information  stated  above.  I  thought  up  to  that  time  it  was  about  of  the  quality 
of  Electra  oil,  but  of  not  quite  the  gravity. 

F.  V.  Faulkneb. 
Sworn  to  and  subscribed  before  me,  a  Notary  Public,  in  and  for  Dallas 
County,  Texas,  this  27th  day  of  October  1914. 

[seal.]  r.  l.  Holmes,  Notary  Public. 


Exhibit  4. 

AFFIDAVIT  OF  D.  C.  STEWART  RELATING  TO  EARLY  CONDITIONS 

IN  THE  HEALDTON  FIELD. 


State  of  Texas 
County  of  Dallas 


) 


D.  C.  Stewart  being  sworn,  deposes  and  says  on  oath  that,  he  was  during  the 
year  1913,  connected  with  the  Magnolia  Petroleum  Company,  being  the  Man- 
ager of  its  pipe  line  department  and  that  he  continued  in  the  service  of  said 
Company  up  to  about  February  26,  1914,  when  his  work  with  the  Company 
was  discontinued,  and  he  went  to  China. 

That  the  Magnolia  Pipe  Line  Company  was  organized  the  latter  part  of  the 
year  1913,  and  affiant  was  likewise  connected  with,  and  in  the  service  of  that 
Company  up  to  his  departure  for  China. 

Affiant  remembers  that  sometime  after  the  first  well  in  the  Healdton  field 
came  in,  Mr.  F.  V.  Faulkner,  Vice-President  and  General  Manager  of  the  Cor- 
sicana Petroleum  Co.,  brought  to  Corsicana  a  sample  bottle  containing  about 
one  quart  of  the  oil  from  the  first  well  reported  to  have  been  brought  in,  in 
that  field.  Mr.  Faulkner  brought  the  oil  into  the  office  at  Corsicana,  and 
affiant  saw  the  sample,  and  according  to  his  recollection,  it  was  left  in  the  office 
of  Mr.  B.  H.  Stephens,  Mr.  Brown's  assistant,  and  affiant  does  not  know  what 
became  of  it,  and  has  no  knowledge  of  any  test  of  that  sample  having  been 
made. 

Affiant,  sometime  between  the  middle  of  August  and  first  of  September,  1913, 
visited  the  first  well  of  the  Healdton  oil  field,  and  of  course,  looked  at  it,  and 
the  oil  produced  therefrom,  but  did  not  at  that  time,  take  any  sample  of  the 
oil,  or  test  it. 

Subsequently,  about  November  3,  1913,  affiant,  together  with  Sam  Redd, 
Lease  Agent  of  the  Corsicana  Petroleum  Co.,  went  to  the  Healdton  oil  field 
together,  and  affiant  obtained  a  sample  of  the  oil  from  the  second  well  brought 
in,  In  that  field,  out  of  a  250  bbl.  tank  located  near  the  well,  and  tested  it 


1       I 


100 


CONDITIONS  IN  THE  HEALDTON   OIL  FIELD. 


with  a  small  hydrometer,  and  as  affiant  read  the  test  at  that  time,  (evidently 
erroneously),  it  showed  to  be  39  degrees  gravity,  and  affiant,  on  such  examina- 
tion, reported  to  E.  R.  Brown  and  others,  that  the  gravity  of  the  Healdton 
crude,  as  shown  by  that  test,  was  39  degrees  gravity,  and  the  oil  was  similar  to 
the  Electra  oil.  Affiant,  based  on  said  test,  in  good  faith  believed  the  Healdton 
crude  would  range  from  38  to  39  degrees  gravity,  and  would  compare  favorably 
with  the  Electra  oil. 

This  belief,  as  to  the  character  of  the  oil,  continued  up  to  the  time  the 
affiant  left  America  for  China,  and  affiant  did  not  know  until  after  his  arrival 
in  China  that  the  oil  was  of  a  different  character  and  of  a  lower  gravity,  and  of 
a  quality  inferior  to  the  Electra  oil,  he  having  received  this  report  by  letter. 
Affiant  further  says  that  notwithstanding  his  report  to  E.  R.  Brown  of  the 
character  and  quality  of  the  oil,  Mr.  Brown  insisted  that  a  sample  of  the  oil 
be  shipped  to  Beaumont  Refinery  for  a  Refinery  test,  and  accordingly,  a  barrel 
of  the  oil  was  shipped  under  affiant's  instructions,  by  E.  A.  Latimer,  on  the 
20th  day  of  January,  1914,  said  barrel  of  oil  being  long  delayed  in  transit,  and 
consequently  the  Refinery  test  intended  was  delayed. 

Affiant  does  not  know  exactly  when  sample  barrel  reached  Beaumont,  but  up 
to  the  time  he  left  for  China,  he  had  not  learned  of  its  reaching  its  destination. 

D.  C.  Stewabt. 

Sworn  and  subscribed  to  before  me  this  the  5th  day  of  November,  A.  D.  1914. 

[SEAL.]  W.  L.  Holmes, 

Notary  Pullic  in  ind  for  Dallas  County,  Texas, 


Exhibit  5. 

AFFIDAVIT  OF  E.  R.  BROWN  RELATING  TO  EARLY  CONDITIONS  IN 
THE  HEALDTON  FIELD,  AND  LETTER  FROM  E.  E.  PLUMLY  TO 
E.  R.  BROWN  CONCERNING  TESTS  OF  HEALDTON  CRUDE  OIL. 


s.      I 

LLAS.J 


State  of  Texas. 
County  of  Dal: 

E.  R.  Brown,  being  sworn,  says  on  oath  that  he  is  now  and  was  during  ttie 
year  1913  vice  president  and  general  manager  of  the  Magnolia  Petroleum  Com- 

pany. 

Affiant  says  he  has  no  definite  recollection  aboat  the  sample  of  oil— about 
one  quart— to  which  Mr.  F.  V.  Faulkner  refers  in  his  affidavit,  but  does  remem- 
ber that  some  sample  of  the  Healdtoi-  Oil  of  a  smaller  quantity  was,  within  a 
few  months,  perhaps  within  a  few  weeks,  after  the  bringing  in  of  the  first  well 
in  the  Healdton  Field,  turned  over  to  him,  and  sat  on  j.s  (.esk  for  some  time. 
The  sample  referred  to  was  in  a  small  bottle  and  wis  not  as  large  as  tht 
referred  to  in  Mr.  Faulkner's  affidavit.  It  \iiC  water  in  the  bottom  and  had 
the  appearance  of  having  been  picked  up  out  of  a  pit.  Affiant  remembers  that 
sometime  after  the  drilling  in  of  the  first  well  in  the  Healdton  Field  and  per- 
haps after  the  drilling  in  of  the  second  well,  Mr.  D.  C.  Stewart  reported  to 
him  that  the  Healdton  Crude  was  of  about  39  gravity  and  appeared  to  be  simi- 
lar to  the  Electra  Oil ;  and  such  was  the  understanding  and  belief  of  affiant 
with  reference  to  the  Healdton  Crude  up  to  the  time  that  Mr.  E.  E.  Plumly. 
manager  of  the  refineries  of  the  Magnolia  Petroleum  Company,  made  his  report, 
dated  February  25th,  1914,  a  copy  of  which  is  hereto  attached,  which  was  the 
first  information  affiant  had  concerning  the  actual  quality  and  character  of 
the  Healdton  Oil,  being  the  first  refinery  test  reported  to  affiant  on  the  subject. 


\^ 


^ 


A 


■i 


f  •, 


EXHIBITS. 


101 


This  report  was  a  great  surprise  to  affiant,  as  prior  to  that  he  had  been  rely- 
ing upon  the  report  of  Mr.  Stewart  that  the  Healdton  Oil  was  about  39  gravity 
and  similar  to  the  Electra  Oil.  A  subsequent  refinery  test  to  the  one  referred 
to  above,  indicated  the  sulphur  difficulty  in  the  oil  as  well  as  its  deficiency  of 
gasoline  and  kerosene. 

Upon  receipt  of  the  report  of  Mr.  Plumly,  of  date  February  25th,  1914,  affiant 
sent  John  Ricker,  one  of  the  employees  of  the  Magnolia  Petroleum  Company 
to  the  Healdton  Field  to  sample  and  test  the  gravity  of  the  oil  coming  from 
each  well  in  that  field.  John  Ricker  did  this  and  brought  back  samples  which 
showed  that  the  oil  from  the  different  wells  ranged  in  gravity  from  about  29 
to  34°  Baum6  and  that  there  was  not  enough  difference  between  the  sample 
first  tested  by  Mr.  Plumly  and  the  average  oil  produced  from  the  various  wells 
to  justify  any  difference  in  price,  situated  as  the  Magnolia  Pipe  Line  Company 
and  the  Magnolia  Petroleum  Company  were.  Upon  receiving  Mr.  Plumly's 
first  report,  of  date  February  25th,  1914,  affiant  had  the  hope  that  there  would 
be  some  substantial  difference  between  that  sample  and  the  average  oil  in  the 
field  and  there  was,  for  a  short  time,  a  difference  in  price  posted  for  oil  of  32 
gravity  and  under  and  that  over  32  gravity,  because  it  was  not  then  clear  that 
there  was  not  enough  difference  between  the  sample  tested  and  the  other  oil 
produced  in  the  field  from  the  other  wells  to  justify  a  difference  in  price.  Later 
on  the  sulphur  difficulty  appeared  in  all  the  oil  from  the  Healdton  Field  and 
that,  together  with  the  fact  that  all  the  oil  was,  on  an  average,  of  a  gravity 
of  about  31°  and  deficient  in  the  quantity  of  lighter  products  contained,  ren- 
dered it  necessary  to  post  the  same  price  for  all  the  Healdton  oil  and  abolish 
the  differential  that  had  formerly  existed. 

E.  R.  Bbown. 

Sworn  to  and  subscribed  before  me,  this  2nd  Day  of  November,  A.  D.,  1914. 

[SEAL.]  W.  L.  Holmes, 

Notary  PuUic,  Dallas  Co.  Texas, 


Feb.  25,  1914,  Beaumont,  Texas. 
Mr.  E.  R.  Bbown, 

Corsicana,  Texas. 
Dear  Sib  :  We  received  the  barrel  of  Healdton  Crude  which  gave  the  follow- 
ing tests :  Gravity  29.1,  Flash  120,  Burn  170,  Color,  Dark  Green.     Following  are 
the  cuts: 


5% 

Gravity  51.2 

Temperature  349 

5% 

46.  5 

388 

5% 

43.  2 

"             436 

5% 

40.  8 

«              482 

5% 

38. 7 

526 

5% 

37. 4 

552 

5% 

36.  5 

568 

5% 

35.  7 

594 

5% 

34.  8 

••              614 

5% 

34.  2 

5% 

33.7 

5% 

33.8 

5% 

**        35. 2 

5% 

34. 0 

5% 

31.  7 

5% 

"        30.5 

5% 

"        30.4 

102 


CONDITIONS  IN   THE  HEALDTON  OIL  FIELD. 


I  am  disappointed  in  this  crude,  as  I  thought  it  was  a  light  oil.    From  the 

above  distillation  tests,  we  would  not  be  able  to  get  over  5%  of  gasoline  and 

20  to  25%  of  heavy  gravity  refined  oil. 

Yours,  very  truly, 

E.  E.  Plumlt. 


Exhibit  6. 

LETTEB    FROM    E.    E.    PLUMLY    TO    E.    B.    BROWN    RELATING    TO 

SULPHUB  IN  HEALDTON  CBUDE  OIL. 

Beaumont,  Texas,  Mar.  25,  1914, 

Mr.  E.  R.  Brown, 

Corsicana,  Texas. 
Dear  Sir  :  On  further  investigating  Healdton  Crude,  we  find  that  it  contains 
so  much  sulphur  that  I  am  really  puzzled  to  know  what  to  do  with  it.  The 
crude  itself  contains  .714%  sulphur:  this  is  not  a  free  sulphur  and  does  not 
pass  off  with  the  gas;  therefore,  the  first  5%  which  can  be  put  into  naphtha 
contains  .019%  sulphur.  This  can  be  taken  care  of  by  mixing  with  naphtha 
from  Electra  Crude,  which  shows  only  .005%  and  naphtha  specifications  are 
.010%  sulphur.  The  next  10%  which  we  had  figured  on  putting  into  44  grav- 
ity water  white  oil,  contains  .183%,  and  the  next  15%  which  would  go  into  42 
gravity  common  oil  shows  .200%.  We  took  the  cuts  from  water  white  and 
re-run  it  as  we  would  South  Texas  Crude  to  throw  off  the  sulphur,  and  the 
first  10%  over  showed  .106% ;  the  next  80%  showed  .172%  sulphur.  The  limit 
on  water  white  oil  is  .040%  and  on  common  oil  .065%.  By  this  you  can  readily 
see  what  we  are  up  against  in  trying  to  handle  this  oil.  In  my  opinion  Heald- 
ton Crude  is  absolutely  a  fuel  oil  proposition.  The  small  per  cent  of  naphtha 
which  must  be  taken  off  in  order  to  get  sufficient  flash  for  fuel  oil  will  not  pay 
the  cost  of  reducing. 

Yours,  very  truly, 

B.  B.  Plumlt. 


Exhibit  7. 

TELEGRAMS  BETWEEN  E.  B.  BBOWN  AND  H.  C.  EOLGEB,  JB.,  RE- 
LATING TO  SULPHXTB  IN  HEALDTON  CBUDE  OIL. 

Corsicana,  Texas,  Mar.  24,  1914* 

H.  O.  FoLGER,  Jr., 

26  Broadway,  New  York. 
Now  find  that  the  sulphur  in  Healdton  crude  is  so  high  and  expensive  to 
remove  from  refined  oil  produced  by  it  that  it  will  not  pay  to  run  it  except  for 
naphtha  and  fuel  oil.  This  makes  it  necessary  to  buy  from  six  to  eight  thou- 
sand barrels  of  refinable  crude  per  day  elsewhere  and  it  seems  necessary,  in 
addition  to  our  previous  plan  of  doubling  line  from  Alvord  to  Fort  Worth  and 
erecting  skimming  plant  to  extend  Magnolia  pipe  line  to  Cushing  where  there 
is  an  abundance  of  light  crude.  To  do  this  we  must  in  addition  to  increasing 
capital  of  Magnolia  Petroleum  Company  as  proposed,  also  increase  capital  of 
Magnolia  Pipe  Line  Company  to  one  million  dollars  paid  up.  Sealy,  Greer  and 
Plumly  are  here  today  and  would  like  reply  before  night  if  possible. 

Please  Rush. 

B.  B.  Brown. 


*     I 


^^ 


EXHIBITS. 


103 


New  York,  Mar.  24,  1914. 

B.  B.  Brown, 

Corsicana,  Texas. 
Quality  Healdton  crude  a  surprise.    It  would  be  well  to  have  process  which 
removes  sulphur  investigated  to  decide  what  best  be  done  for  refining  it.    Pro- 
gramme outlined  in  message  so  costly  it  should  be  considered  only  as  a  last 
resort.    Cannot  today  even  undertake  to  subscribe  as  suggested  in  your  letter 

March  14th. 

H.  C.  Folger,  Jr. 


Exhibit  8. 

LETTEB  FBOM  E.  B.  BBOWN  TO  E.  E.  PLUMLY  DIBECTING  A 
TO  BE  MADE  OF  HEALDTON  CBUDE  OIL. 


TEST 


March  26,  1914. 

Mr.  E.  K  Plumlt, 

Beaumont,  Texas. 
Dear  Sir:  As  you  will  be  running  some  of  the  Healdton  Crude  at  the 
Corsicana  plant  within  the  next  few  days,  would  it  not  be  a  good  plan  on  this 
first  run  to  make  a  test  to  see  in  a  practical  way  what  can  be  done  with  the 
small  amount  of  refined  oil  that  you  would  get  from  it?  In  other  words,  run  off 
probably  25%  instead  of  5%  or  6%,  treating  the  distillate  and  re-running  it, 
making  as  accurate  experiments  as  possible,  to  see  what  grade  of  oil  you  would 
get  and  as  to  the  cost  of  running  it.  Unless  we  can  get  a  small  amount  of 
refined  oil  from  it  we  could  not  afford  to  pay  70  cents  for  the  crude  based  on 
the  present  fuel  market,  and  we  should  make  every  effort  to  get  the  most  value 
out  of  the  oil  possible  so  as  to  be  able  to  pay  as  high  price  as  we  can,  compared 
to  running  the  other  lighter  and  sweeter  oils. 
Yours  very  truly, 

E.  B.  Brown. 


Exhibit  9. 

BEPOBT  ON  THE  ANALYSIS  OF  HEALDTON  CBUDE  OIL,  MADE  BY 
M.  C.  WHITAKEB  TO  THE  UNITED  STATES  BUBEAU  OF  MINES. 

[Tlie  following  report  was  made  to  the  United  States  Bureau  of  Mines,  and  it  is  published 

with  its  permission.] 


M.  C.  Whitaker,  M.  Sc. 


F.  J.  Metzger,-  Ph.  D. 


CX)NSULTING 

INDUSTRIAL  AND  ENGINEERING 

CHEMISTS 

Broadway  and  116th  Street 
New  York  City 

BEPORT  ON  THE  ANALYSIS  OF  CRUDE  OKLAHOMA  PETROLEUM. 

We  received  on  May  29th,  1914,  three  sealed  samples  of  crude  petroleum  de- 
scribed as  follows: 

(1)  Number  1470.  Lease,  Silsanny  Jones  Allot — Dept.  lease:  Township,  Sec. 
4,  T4S,  B3W:  Carter  County,  Oklahoma:  Owner,  Coline  Oil  Company,  Ard- 


104 


CONDITIONS  IN   THE  HEALDTON   OIL  FIELD. 


EXHIBITS. 


105 


more,  Oklahoma :  Well  No.  1  located  at  extreme  SW  cor.  Nl  N^  SW  Si  NW. 
Sampled  by  Irving  C.  Allen,  May  23, 1914.    Our  laboratory  number  14531. 

(2)  Number  1^64.  Million  &  Thomas  Farm:  Township,  Sec.  5,  T4S,  R3W: 
Carter  County,  Oklahoma :  Owner,  Crystal  Oil  Company,  Ardmore,  Oklahoma : 
Well  No.  3  located  at  extreme  SE  cor.  of  Si  of  SE.  Sampled  by  Irving  C. 
Allen,  May  23,  1914.    Our  laboratory  number  14532. 

(3)  Number  lJf69.  Apple-Franklin-Harrold  Farm:  Township,  Sec.  8,  T4S, 
R3W:  Carter  County,  Oklahoma:  Owner,  Rex  Oil  Company,  Ardmore,  Okla- 
homa :  Well  No.  2.  Sampled  by  Irving  C.  Allen,  May  23,  1914.  Our  laboratory 
number  14530.     [This  specimen  was  not  analyzed.] 

No  one  method  for  the  analysis  of  crude  petroleum  has  been  carefully  inves- 
tigated and  adopted  for  universal  use,  as  has  been  done  in  the  case  of  many 
of  our  other  analytical  processes,  and  chemists  are  therefore  at  liberty  to 
choose  whichever  method  is  the  most  convenient  or  available. 

In  order  to  establish  the  composition  of  these  oils,  we  have  analyzed  and 
tested  samples  No.  1470  and  No.  1464,  by  each  of  the  four  methods  commonly 
described  in  the  most  recent  books  treating  the  subject  of  petroleum  analysis. 
A  fifth  method  known  as  Grey's  method  might  have  been  added  to  this  list,  but 
it  would  have  required  a  larger  amount  of  oil,  and  the  results  would  not  have 
been  materially  changed.  The  methods  we  have  used  may  be  briefly  sum- 
marized as  follows : 

First:  Engler  Method. — (See  Allen's  Commercial  Organic  Analysis,  Vol.  Ill, 
page  48,  1910.)  Distill  100  cc.  of  the  oil  from  a  glass  distilling  flask  of  specified 
dimensions,  collecting  separately  the  fractions  passing  over  between  the  fol- 
lowing temperatures:  below  150°  C,  150*  to  200°,  200°  to  250°,  250°  to  300°, 
above  300°.  When  the  temperature  reaches  the  maximum  for  each  fraction, 
the  source  of  heat  is  removed  and  the  temperature  allowed  to  fall  20°  and  then 
heated  again  to  the  maximum  for  the  fraction.  This  process  is  repeated  until 
no  more  distillate  is  obtained  for  that  fraction.  The  temperature  is  then 
brought  up  for  the  succeeding  fraction  and  the  same  practice  of  running  up  to 
the  maximum  and  dropping  back  20°  is  continued  until  the  fraction  is  com- 
plete. The  final  temperature  is  carried  up  to  the  point  at  which  coke  only  Is 
left  in  the  flask. 

Second:  Ubhelohde  Method. — (See  Allen's  Commercial  Organic  Analysis,  Vol. 
Ill,  page  50,  1910.)  Distill  100  cc.  of  the  sample  in  a  distilling  flask  of  approxi- 
mately the  same  dimensions  as  that  used  by  Engler,  but  by  a  uniform  and 
continuous  application  of  the  heat,  collecting  the  various  fractions  between 
the  temperatures  as  specified  by  Engler. 

Third:  Regnault  Method. —  (See  Redwood,  Petroleum  and  Its  Products,  Vol. 

II,  page  536,  1906.)  Distill  100  cc.  of  the  sample  from  a  metal  retort  connected 
with  a  metal  condenser,  water-cooled.  The  heat  is  applied  uniformly  and  con- 
tinuously, and  the  fractions  are  collected  as  in  the  Ubhelohde  Method. 

Fourth:  Natoratil  Method. —  (See  Allen's  Commercial  Organic  Analysis,  Vol. 

III,  page  50,  1910.)  Distill  from  a  glass  retort,  uniformly  and  continuously 
heated,  collecting  the  several  fractions  as  already  indicated.  This  method  is 
used  by  many  American  chemists. 

In  order  that  our  results  might  be  comparable  one  with  another,  we  have 
adhered  to  the  temperature  ranges  indicated  in  the  First  or  Engler  Method, 
for  the  separation  of  the  various  fractions  in  all  distillations. 


\     !     ■• 


i^ 


I  J 


^     & 


ENGLEB   METHOD. 

Sample  No.  1470.    8p.  gr.  =0.8734  at  60°  F.    First  drop  at  end  of  flask  at  70"  C. 


Temperatiire,  '  C. 

Volume 
per  cent. 

Sp. 

60 

Below  150     

9.3 

9.0 

11.0 

12.7 

52.9 

3.5 

1.6 

0.7467 

150to200       ...               

0.7815 

200  to  250 

0.8173 

250  to  300 

0.8413 

Above  300 

0.8861 

Coke 

Loss  (eases,  etc.) 

Sample  No.  1464.    Sp.  gr.=0.8608  at  60°  F,    First  drop  at  end  of  flask  at  50°  C. 


Below  150 

16.7 
&2 
9.0 
11. 1 
60.5 
2.6 
1.9 

0.7361 

150  to  200 

0.7931 

200  to  250 

0.8206 

250  to  300 

0.8421 

Above  300 

a8877 

C!oke      .                            

Loss  (cases,  etc.) 

UBBELOHDE    METHOD. 

Sample  No.  1470.    First  drop  at  end  of  flask  at  60°  C, 


Below  150 

5.2 
10.2 
11.0 
11.1 
56.0 
4.8 
1.7 

0.7486 

150  to  200 

0.7750 

200  to  250 

0.8092 

250  to  300 

0.8331 

Above  300 

a  8798 

Coke : 

Loss  (cases,  etc.) 

Sample  No.  1464'    First  drop  at  end  of  flask  at  5o°  C. 


Below  150 

11.5 

10.7 

9.7 

10.4 

53.5 

3.1 

1.1 

a7265 

150  to  200 

0.7747 

200  to  250 

0. 8130 

250  to  300 

0.8369 

Above  300 

0.8822 

Coke    - 

Loss  leases,  etc.)  . ... 

EEGNAULT   MEIHOD. 


Sample  No.  1470.    First  drop  at  end  of  condenser  at  110°  C, 


Below  150 

150  to  200 

200  to  250 

250  to  300 

Above  300 

Coke 

Loss  (gases,  etc.) . 


3.7 

0.7458 

10.4 

0.7726 

12.0 

0.8053 

12.4 

0.8345 

56.0 

a  8762 

3  9 

1.6 

Sample  No.  1464.    First  drop  at  end  of  condenser  at  90°  C. 


Below  150 

9.5 

9.6 

10.3 

11.3 

.';.3.5 

2.7 

3.1 

0.7289 

150  to  2(X)            

0.7745 

200  to  250 

0.80S3 

250  to  300           

0.S354 

Above  300          

a8794 

Coko                  

Loss   /'f'ascs.  etc  )   .. • 

li 


106 


CONDITIONS  IN   THE  HEALDTON   OIL  FIELD. 
NAWBATIL  METHOD. 

Sample  No.  WO.    First  drop  at  end  of  retort  at  90"  O. 


Temperature,  *  C. 


Below  150 

150  to  200 

200  to  250 

250  to  300 

Above  300 

Coke 

Loss  (gases,  etc.) . 


Sp.  gr.  at 
60VF. 


0.7556 
0. 7750 
0.8049 
0.8322 
0.8798 


Sample  No.  VM-    First  drop  at  end  of  retort  at  75"  C. 


Below  150 

150  to  200 

200  to  250 

250  to  300 

Above  300 

Coke 

Loss  (gases,  etc.). 


ILl 
8.6 

10.5 

11.1 

52.5 

4.8 

L4 


0.7372 
0. 7774 
0.8059 
0.8351 
0.8705 


«« 


Chemists  usually  report  the  fraction  distilling  over  below  150°  C.  as 
Naphtha";  the  combined  fractions  distilling  between  150**  and  300°  C.  as 
"  Illuminating  Oils  " ;  that  distilling  above  300°  C,  as  "  Lubricating  Oil."  In 
the  following  tables  the  analyses  have  been  grouped  in  the  customary  manner : 

Sample  No.  UIO. 

[Bracketed  items  in  the  following  tables  have  been  inserted  by  Bureau  of  Corporations  In 

order  to  secure  completeness  of  presentation.] 


"Naphtha" 

"Illuminating  Oil" 
"Lubricating  Oil". 

rCoke 

I   Loss 

L       Total 


Engler. 


Per  cent. 

9.3 

32.7 

52.9 

3.5 

1.6 


100.0 


Ubbe- 
lohde. 


Per  cent. 

5.2 

32.3 

56.0 

4.8 

1.7 


100.0 


Reg- 
nault. 


Per  cent. 

3.7 

34.8 

56.0 

3.9 

1.6 


100.0 


Naw- 
ratil. 


Percent. 

2.8- 

34.0 

67.5 

4.0 

1.7 


100.0  J 


Sample  No.  1464- 


"Naphtha" 

"Illuminating  Oil" 
"Lubricating  Oil". 

rCoke 

I  Loss 

L       Total 


Engler. 


Per  cent. 

16.7 

28.3 

50.5 

2.6 

1.9 


100.0 


Ubbe- 
lohde. 


Per  cent. 

11.5 

30.8 

53.5 

3.1 

1.1 


100.00 


Reg- 
nault. 


Per  cent. 

9.5 

31.2 

53.5 

2.7 

3.1 


100.0 


Naw- 
ratil. 


Per  cent. 

11.  r 

30.2 

52.5 

4.8 

1.4 


100.0. 


^       1 


I 


EXHIBITS. 


107 


A  comparison  of  the  results  obtained  shows  a  wide  discrepancy  in  amounts 
of  the  various  products  obtained  by  the  several  methods  of  analysis,  and  this 
difference  is  especially  great  in  the  case  of  the  "  naphtha."  On  sample  No.  1464 
about  one  and  three-fourths  times  as  much  "naphtha"  is  obtained  by  the 
Engler  method  as  by  the  Regnault  method,  whereas  in  sample  No.  1470  the 
"  naphtha  "  obtained  by  the  Nawratil  method  is  less  than  one-third  that  obtained 
by  the  Engler  method.  The  variations  shown  in  the  analysis  of  your  oils  by 
the  different  methods  are  directly  in  accord  with  our  previous  experience, 
extending  over  a  number  of  years.  We  do  not  consider  any  of  the  existing 
methods  as  dependable.  It  is  doubtful  if  any  of  these  methods  will  give  results 
even  approximating  those  attained  in  practical  distillation.  We  frequently 
encounter  disputes  between  producer  and  refiner  as  to  the  proper  evaluation  of 
an  oil,  due  to  a  difference  in  results  obtained  by  different  methods  of  analysis. 
We  have  frequently  urged,  and  still  urge,  that  the  whole  question  of  crude  oil 
analysis  and  method  of  valuation  be  subjected  to  the  most  thorough  investiga- 
tion with  a  view  to  establishing  a  standard  method  of  analysis  and  report. 
Such  a  method  would  be  promptly  adopted  by  the  chemists,  as  was  the  case  in 
the  standardized  methods  of  coal  analysis,  with  the  result  that  specifications 
may  be  drawn  with  fairness  to  producer  and  purchaser,  and  deliveries  checked 
by  both  parties  with  reasonable  accuracy. 

The  commercial  value  of  the  transactions  in  crude  petroleum  would  justify 
the  establishment  of  investigation  into  the  methods  of  evaluation  on  a  broad  plan. 
The  investigation  should  not  be  limited  to  a  few  laboratory  comparisons  of 
methods,  as  has  been  done  in  the  past,  but  should  be  taken  up  with  the  producers, 
refiners  and  chemists,  with  a  view  to  correlating  their  problems  and  interests. 

Respectfully  submitted. 

M.  C.  Whitakeb. 


Exhibit  10. 

STATEMENT  OF  THE  MAGNOLIA  PETROLEUM  CO.,  SHOWING  AN 
EXPERIMENT  WITH  45  GALLONS  OF  HEALDTON  CRUDE  IN  DE- 
TERMINING WHETHER  OR  NOT  CYLINDER  OILS  CAN  BE  IN  A 
PRACTICAL  WAY  MANUFACTURED  FROM  HEALDTON  CRUDE  FOR 
COMMERCIAL  PURPOSES. 


l-harrel  from  Corsicana 


Run  #9 
Grav:    30.6.flash      below    60*" 
Pour  O.    Color,  Black  Green 
Sulphur,  .638 


45-Gallons  of  this  crude  oil  was  treated  as  follows : 

2-Lbs.  per  bbl.  of  settling  acid— 1/2  hour  agitation— 1  hour  settling  drew  off 

1/2  gallon  of  sludge. 
1st  dump :  10  lbs.  of  acid — 45  minutes  agitation— 3  hours  settling  drew  off 

7  gallons  of  sludge. 
2nd  dump:  5  lbs.  of  acid — 45  minutes  of  agitation— 10  hours  settling  drew 

off  2  1/2  gallons  sludge. 
Transfer  to  other  agitator  and  wash  with  water — 2  still  washes  and  four 

slow  agitation  washes,  each  of  1  hour  duration.    Great  trouble  was 

encountered  in  these  washes,  due  to  emulsification.    Time   required 

for  wash  water  to  settle  out  was  24  hours. 


^Sjk^nC!!3E!!! 


108 


CONDITIONS  IN  THE  HEALDTON  OIL  FIELD. 


Neutralizing  with  lye  was  very  hard — four  times  the  amount  of  total  lye 
used  for  treatment  of  oil  was  required  to  bring  oil  into  lyesids. 
Strength  of  lye  used  was  20  Be'L.  It  was  given  in  four  dumps — 
settling  24  hours — draw  off  2  gallons  of  lyesoap. 

5  Water  washes  of  ordinary  temperature  and  5  at  120  F.  were  re- 
required  to  wash  out  lye:  each  wash  talking  1  hour  slow  agitation 
and  24  hours  settling.  The  same  trouble  of  emulsifleation,  as  found  In 
washing  out  acid  was  encountered  in  washing  out  lye. 

Loss  in  treatment  of  this  batch  amounted  to  33  1/3%. 

Considerable  trouble  experienced  with  former  treatments  of  Healdton 
Crude  seem  to  justify  the  statement  that  it  is  not  practical  to  treat 
this  crude  on  large  scale. 


27  Gallons  of  This  Treated  Crude  Oil  were  run  for  Cylinder  Oil.    Treated  Crud 
Gravity  29.0:  Flash  130  0.  C.    Pour  15.    Sulphur  .602:  Color  Blue-green. 


Cut 

Per 
f-ont. 

Temp 

Grav 

Flash 

Vis 

ChUl 

1 

5 

430 

*47.9 

2 

485 

448 

20%  Kerosene,  Grav  43.7  Flash  120  OC  Fire 

3 

510 

42.2 

150  O.C.    Sulphur  .161 

4 

5:^0 

40.0 

8 

.*) 

54S 

38.5 

22 

6 

560 

37.0 

36 

20%  Gas  Oil  Distillate.  Grav  36.0  Flash  205 
Pensky  Martin.    Sulphur  .385.    Pour  40. 

7 

5S0 

35.7 

42 

.    8 

588 

34  2 

50 

9 

592 

32.2 

310 

58 

68 

10 

598 
602 
612 

30.3 
29.1 
27.0 

325 
345 
305 

72 
97 
158 

62 
76 
82 

30%  Nondescript  Oil,  Grav.  28.1    Flash  295 

11 
12 

OC.  Vis  129  at  lOOS.  Pour  70.  Sulphur 
.696. 

13 

634 

26.0 

245 

250 

84 

14 

648 

25.2 

240 

320 

88 

Bottom  30%  of  Cylinder  Oil. 
Grav.  17.1 
Flash  535 
Fire  615 
Vis.  411  at  212 
Pour  40. 

Odor,  Sulphurous 
Color,  Blueish  green 
Appearance,  sticky,  stringy  pulpy. 


This  last  part  is  worthless  for  any- 
thing except  fuel  oil  for  home  con- 
sumption or  for  thinning  out  heavy 
residues.  Only  an  elaborate  and 
non-paying  process  could  convert  it 
into  either  gas  oil  or  lubricating  dis- 
tillate. Also  the  paraffine  could  not 
be  extracted  without  the  extra  run 
which  would  be  necessary  for  the 
manufacturing  of  either  of  the  above- 
mentioned  grades. 


Total  Contents  of  Treated  Crude  OiL 
20%  Kerosene 
20%  Gas  Oil 
30%  Nondescript  Oil 
30%  Cylinder  Oil. 

100% 


«i 


EXHIBITS. 


109 


Note  by  Bureau :  Yield  of  Healdton  crude  oil,  shown  in  percentages  of  the 

volume  of  the  crude  refined : 

Per  cent. 

Kerosene ^^'  ^ 

Gas  oil ^3-  ^ 

Nondescript  oil 20.00 

Cylinder  oil 20. 00 

Loss ^-  ^ 


100.00 


Exhibit  11. 

STATEMENT  OF  THE  MAGNOLIA  PETROLEUM  CO.,  SHOWING  AN 
EXPERIMENT  WITH  1  BARREL  OF  HEALDTON  CRUDE  FOR  THE 
PURPOSE  OF  DETERMINING  IF  ENGINE  OILS  CAN  BE  MANU- 
FACTURED THEREFROM. 

l-BABBEL   HEALDTON   CRUDE  FOB  COBSICANA,   GBAVITY   30.6. 


Temperature 

Per 
cent 

Grav 

ChiU 

Cuts 

Still 

Vapor 

1 

2.5 

360 

260 

61.0 

_ 

i 

« 

390 

290 

58.1 

— 

Naphtha  7J%. 

S 

« 

420 

330 

55.2 

— 

4 

(( 

450 

360 

51.6 

— 

Light  end,  Common  Oil  25%. 

m 

6 

« 

470 

380 

48.7 

— 

« 

« 

500 

400 

46.8 

— 

7 
8 

<< 

520 
540 

420 
440 

45.1 
43.3 

, 

Water  White  Stock,  15%. 

9 

« 

560 

460 

41.8 

— 

10 

<( 

590 

490 

40.5 

— 

11 
12 

<< 
11 

600 
619 

510 
520 

39.5 
39.0 

"" 

1  Ileavy  End,  Common  Oil  7^%. 

13 

(I 

634 

534 

37.9 

— 

14 

<( 

650 

559 

37.5 

— 

15 

11 

S3 

562 

36.5 

— 

16 

<( 

:_ 

563 

36.5 

16 

17 

t( 

SE 

565 

36.7 

18 

18 

ti 

K 

570 

36.8 

22 

19 

(( 

c= 

571 

36.7 

18 

jGas  Oil  Dist.  27.5%. 

20 

(< 

K 

572 

35.6 

26 

21 

(( 

a. 

573 

34.4 

26 

22 

<( 

s 

589 

34.1 

26 

23 

(( 

ms 

595 

34.5 

26 

24 

<t 

_ 

591 

35.2 

26 

25 

it 

M 

591 

35.2 

28 

26 

<< 

_ 

591 

36.5 

32 

27 

<< 

as 

591 

38.5 

40 

28 

<< 

sss 

591 

37.5 

32 

29 

<< 

.. 

592 

36.5 

70 

30 
31 

= 

593 
593 

37.0 
37.5 

42 
70 

30%  ParafBne  Dist,  Grav.  33.1,  Pour  40. 

32 

« 

_ 

597 

35.3 

82 

33 

(< 

,m 

600 

32.5 

76 

34 

« 

Ml 

600 

32.2 

84 

35 

(( 

_ 

600 

32.1 

86 

36 

(( 

M 

600 

30.9 

90 

37 

tt 

aa 

600 

18 

112 

VTax  Tailings,  2i%. 

Bottom . . 

Coke,  4.72%,  13iiJ 
Loss,  2.78%. 

\J* 


110 


CONDITIONS  IN   THE   HEALDTON   OIL  FIELD. 


The  parafflne  distillate  was  run  in  1-barrel  still:  overhead  41.07%,  gravity 
40:  Bottom,  58.93%  Heavy  Oil  &  Parafflne,  gravity  27.0:  Flash  325,  viscosity 

77,  Pour  60. 

Bottom  pressed  over  at  40°  F.=92.74%  Lub.  Distillate,  gravity  27.0,  Flash  325, 

Viscosity  77,  Pour  35. 

Slack  Wax  7.26%,  M.  P.  112. 

Slack  wax  treated  with  10#  acid :  sweated  to  M.  P.  produced  63%  of  Foots 

Oil  and  37%  of  128  M.  P.  Wax. 
The  92.74%  Lube.    Distillate  gave  the  following: 


Cut. 

%• 

Temp. 

Qrav. 

Flash. 

Vis. 

Chili. 

1 
2 
3 

4 

5 

5 
ft 

600 
605 

31.5 
30.4 

270 
275 

42 

45 

46 
46 

All  overhead  cuts  mixed  for  Pale  Oil 

610 

29.6 

275 

49 

48 

Grav.  28. 2           Flash  310 

5 

615 

28.1 

280 

54 

46 

Vis.     72              ChlU     46 

5 
6 
7 
8 
g 

5 

620 
622 

27.9 
27.5 

285 
290 

56 
57 

44 

46 

Treated  with  10ft  66  Acid 

K 

625 

27.4 

300 

59 

48 

Grav.  28. 2           Flash  310 

5 

5 

628 
630 

27.3 
27.2 

305 
310 

60 
61 

46 
46 

Vis.     60              Chill     50 
Color  880 

10 

5 

635 

26.9 

315 

62 

46 

11 

5 

630 

26.8 

320 

66 

48 

12 

5 

630 

26.2 

330 

74 

46 

13 

5 

630 

26.1 

335 

82 

44 

14 

5 

635 

25.8 

340 

96 

46 

16 

5 

640 

25.4 

345 

96 

46 

Bottom,  25%  Grav.  22.3,  Flash  390,  Vis.  189,  Pour  35.     (Color  A  Re[d] ) 
Treated  with  15#  of  66  Acid=Grav.  22.4  Flash  39.0  Vis  142,  Chill  46. 
PARAFFINE  DISTILLATE  THATS  WORKED  UP=12.30%  of  overhead  of 
H.  O.  &  P.  12.30%  Pale  Oil,  4.10%  Red  Oil,  0.82%  Foots  Oil  .48%  Finished  Wax. 
Note  by  Bureau:  Yield  of  Healdton  crude  oil,  shown  in  percentages  of  the 

volume  of  the  crude  refined : 

Per  cent. 

Naphtha l^ 

W.  W.  150 ^^-  ^ 

Common  oil "^^'  ^ 

Gas  oil ^2-  ^ 

Foots  oil ^  -^^ 

Pale  oil 12. 30 

Red  oil 4. 10 

Finished  wax *  ■** 

Fuel  oil 2'^-  ^ 

Wax  tailings 2.  50 

coke 4.72 

Loss -_^ 

100.00 


r- 


,v 


** 

? 


A 


EXHIBITS. 


Exhibit  12. 


Ill 


MAGNOLIA  petroleum:  COMPANY  STATEMENT  OF  COMPARATIVE 
REFINING  COSTS  (FIGURES  TAKEN  FROM  CORSICANA  REFINERY 
MONTHLY  STATEMENTS). 

Mabch,  1914. 

Electra  crude  run,  gallons 2,225,201 

Corslcana  light  crude  run,  gallons 258,203 

Total  crude  run 2,483,404 

Refined  oil  and  naphtha  cut  from  total  crude 
run: 

Refined  oil,   gallons 760,966        30.64% 

Naphtha,    gallons 640,598        25.80% 

Cost  of  distillation,  $7,907.37. 

Cost  of  distilling  1  gallon $0. 005641 

Cost  of  treating  1  gallon .001885 

Cost  of  steam  stilling  1  gallon .  000404 

Total  manufacturing  cost  1  gallon  re- 
fined oil  and  naphtha .007930    $0.007930 

April,  1914. 

Electra  crude  run,  gallons 90,707 

Healdton  crude  run,  gallons 4,097,904 

Corsicana  light  crude  run,  gallons 74, 198 

Total  crude  run 4, 262, 809 

Refined  oil  and  naphtha  cut  from  total  crude 
run: 

Refined  oil,  gallons 917,190        21.52% 

Naphtha,   gallons 565,278        13.26% 

Total    cuts 1,482,468 

Cost  of  distillation,  $9,318.59. 

Cost  of  distilling  1  gallon $0.  006285 

Cost  of  treating  1  gallon .  001S65 

Cost  of  steam  stilling  1  gallon .  000480 

Total  manufacturing  cost,  1  gallon  refined  oil  and 

naphtha .  008630 

The  917,190  gallons  refined  oil  shown  above  was  pumped 
to  Beaumont  and  re-run  and  treated  again  at  an  esti- 
mated cost  of  $4,585.95.  This  amount  figured  against 
the  total  cuts  shown  above,  1,482,468  gallons .  003093 

Or  a  total  manufacturing  cost  per  gallon  of  product  of—        .  011723        .  011723 

Difference  in  cost,  March  and  April .  003793 

which  is  equal  to  the  cost  of  removing  the  sulphur  from  1  gallon  of  refined 
product  from  Healdton  Crude, 


■W-fllHgWP" 


112 


CONDITIONS  IN  THE  HEALDTON  OIL  FIELD. 


Exhibit  13. 


AFFIDAVIT  OF  C.  R.  STEWART  RELATING  TO  THE  PIPE  LINE 
COMPANY'S  METHOD  OF  TAKING  OIL  FROM  THE  HEALDTON 
FIELD. 

State  of  Oklahoma! 
County  of  Carter    j 

C.  R.  Stewart  being  duly  sworn,  deposes  and  says  on  oath  that  he  is  now  the 
Field  Manager  for  the  Magnolia  Pipe  Line  Company  in  the  Healdton  oil  field, 
situated  in  Carter  County,  Oklahoma,  and  has  been  such  since  said  pipe  line 
was  completed  about  March  1,  1914. 

That  the  duties  of  affiant  require  him  to  look  after  the  operations  of  the  pipe 
line  in  said  field,  including  the  receipt,  shipment  and  pro  rating  of  the  oil  pur- 
chased from  producers  in  said  field. 

That  E.  A.  Latimer  has  been  during  said  period.  General  Manager  of  the 
Pipe  Line  Company,  and  instructed  affiant  when  the  oil  produced  in  that  field 
became  greater  in  quantity  than  the  pipe  line  could  receive  and  transport,  to 
pro  rate  the  oil  purchased  and  received  from  the  producers  fairly  and  propor- 
tionately between  the  producers  according  to  their  respective  productions,  in 
accordance  with  the  laws  of  the  State  of  Oklahoma,  and  such  has  been  the 
honest  purpose  and  effort  of  affiant  and,  his  instructions  to  the  ganger,  Mr. 
Edington. 

That  up  to  about  March  23,  1914,  the  production  had  been,  in  the  judgment  of 
affiant  and  others  in  charge  of  said  pipe  line,  such  that  the  Pipe  Line  Company 
could  receive  and  handle  all  of  it  and,  therefore,  the  Pipe  Line  Company  was 
up  to  that  date  endeavoring  to  take,  and  took  as  far  as  practical,  the  entire 
current  production  (not  including  the  stock  oil),  deeming  such  course  a  fair 
and  substantial  compliance  with  the  Oklahoma  statutes. 

That,  of  course,  as  necessarily  was  the  case  the  Pipe  Line  Company  took  the 
production  that  was  taken,  both  before  March  23rd  and  after  from  the  various 
producers  by  turns,  receiving  from  one  of  them  today  the  oil  in  his  measuring 
tank,  and  from  another  tomorrow,  and  so  on;  it  being  the  common  custom  in 
the  oil  fields  not  to  take  a  fractional  part  of  the  measuring  tank  when  a  run 
was  taken,  but  all  of  it. 

That  in  so  doing,  of  course  a  producer  who  had  a  large  measuring  tank 
might,  for  the  time  being,  have  more  than  his  proportionate  part  of  the  oil  run 
for  that  particular  day;  but  by  the  time  the  oil  of  other  producers  was  run 
and  his  turn  came  around  again  he  would  probably  be  behind. 

That  about  March  23,  1914,  the  production  of  the  Healdton  oil  field  had  in- 
creased to  a  point  and  other  conditions  had  arisen  to  make  it  impossible  for  the 
Magnolia  Pipe  Line  to  take  all  of  the  production  of  the  field  and  it  was  forced 
to  take  a  fractional  part. 

That  affiant,  as  Field  Manager,  honestly  endeavored  to  run,  and  has  so  far  as 
practical  since  that  date  run  the  oil  of  the  various  producers  proportionate. 

That  of  course  inequalities  between  the  producers  have  existed  on  various 
dates  but  the  same  have  been  "  evened  up  "  and  corrected  at  regular  intervals 
in  accordance  with  the  law  of  Oklahoma  on  the  subject,  which  allows  thirty 
days  for  said  purpose. 

That,  notwithstanding  thirty  days'  time  is  allowed  for  the  purpose  of  equal- 
izing production  between  the  producers,  yet  affiant  and  every  one  in  charge  of 
said  pipe  line,  so  far  as  affiant  knows  and  believes,  has  at  very  much  shorter 


(  \ 


\ 


T 


EXHIBITS. 


113 


intervals  equalized  the  production  between  the  producers,  that  is  to  say;  at 
periods  of  four  or  five  days. 

That  it  has  been,  and  in  the  judgment  of  affiant,  will  continue  to  be  a  physical 
impossibility  to  pro  rate  oil  in  a  field  like  Healdton,  or  in  any  one  field  where 
the  production  is  changing,  with  anything  approaching  absolute  accuracy  for 
the  reason  that  the  production  is  changing  to  a  great  extent  from  day  to  day 
by  the  bringing  in  of  new  wells  and  the  falling  off  of  old  wells,  and  the  pro- 
ducers themselves  to  a  large  extent  either  do  not  know  or  inaccurately  esti- 
mate their  own  productions ;  most  of  them  being  disposed  to  exaggerate  for  the 
purpose  of  getting  as  much  of  his  oil  run  as  possible. 

Affinnt  especially  denies  that  any  intentional  favoritism  was  shown  to  either 
the  McMan  Oil  Company  or  the  Dundee  Petroleum  Company,  and  so  far  as 
jiffiant  knows  and  believes  they  did  not  enjoy  for  any  prohibited  period  more 
than  their  proportionate  part  of  the  runs,  all  regularities  in  favor  of  or  against 
thoni  being  corrected  and  equalized,  at  short  periods  estimated  not  to  exceed 

one  week. 

That  so  far  as  this  affiant  knows  and  believes  no  intentional  discrimination 
against  or  in  favor  of  any  one  has  been  shown  by  any  of  the  officers  or  em- 
•  ployees  of  the  Magnolia  Pipe  Line  Company. 

Since  about  May  5,  1914,  the  oil  in  Healdton  oil  field  has  been  purchased  and 
run  from  the  various  producers  in  accordance  with  the  advice  and  instructions 
of  Mr.  Verne  Calvert,  Official  Inspector  of  the  Healdton  Oil  Field,  appointed  by 
the  Corporation  Commission  of  Oklahoma,  at  the  instance  and  with  the  concur- 
rence of  both  the  producers  and  the  Magnolia  Pii^e  Lines,  for  the  purpose  of 
fairly  and  justly  pro  rating  the  runs  of  oil  from  the  various  producers  in  thut 

field. 

C.  R.  Stewart. 

Sworn  to  and  subscribed  before  me  this  15th  day  of  June,  1914. 

D.  W.  Butcher,  Justice  of  the  Peace. 

(My  Commission  expires  Jan.  1,  1915.) 


Exhibit  14. 

AFFIDAVIT  OF  FRANK  EDINGTON  RELATING  TO  THE  PIPE  LINE 
COMPANY'S  METHOD  OF  TAKING  OIL  FROM  THE  HEALDTON 
FIELD. 


1 


The  State  of  Oklahoma 
County  of  Carter 

Frank  Edington  being  duly  sworn  deposes  and  says  on  oath  that  he  was 
during  the  period  referred  to  in  foregoing  affidavit,  gauger  for  the  Magnolia 
Pipe  Line  Company,  gauging  the  oil  produced  in  the  Healdton  oil  field  and  pur- 
chased by  the  Pipe  Line  Company  from  the  various  producers. 

That  he  has  read  the  foregoing  affidavit  and  has  knowledge  of  the  facts 
therein  referred  to.  and  the  same  are  true  and  correct. 

That  this  affiant  wishes  to  add  to  said  statement  a  further  statement  that 
his  instructions  were  to  pro  rate  the  oil  beween  the  producers  fairly  and 
equitably  in  accordance  with  tlie  laws  of  Oklahoma,  and  that  so  far  as  he 
and  the  others  in  charge  have  been  able  to  do  so  such  instructions  have  been 
carried  out. 

70508"— 15 8 


114  CONDITIONS  IN   THE   HEALDXON   OIL  FIELD. 

;fn„;7as'rra;ll.r,«s.  o.  p.ot.c.  an.  -  -— T" 

sworn  to  and  subscribed  before  me  this  ^^^^^;^^;>l^Z^%,ar„  PMic. 
(My  Commission  expires  April  28,  1918.) 

[SEAL.] 

Exhibit  15. 
COMPANY'S    METHOD    OF    TAKIJNJU    ux^ 

(Kote  by  B«reau.-B.a„.  o.  some  ^^^^^^^^ 

which  the  prorating  of  the  oil  >»  ^f  "f  ^^^j  („  Healdton  and  Investigatea  the 

Chan,bers.  of  the  Magnolia  ^X,J^^Molvn.nk  Edington,  t..keu  from  Mr 
conditions  there.     The  foUow  ng  bU  -.en    o  ^_^  ^^^^  ^^^^^^^^  ^^  ^^^  ^^ 

Chambers'  report  dated  ApiU  9,  i->i*-  »" 

that  time).  ^   .      ^d  of  tbe  total  daily  production 

On  April  1st  we  "««-'  ^e«"2»  ^'',  ,^,a„.  ^^  enable  us  to  arrive  at  the 

of  what  is  known  as  the  Healdton  F>eKl.   "  o™  ^^^^^^^  ^^^^^^  ^^ 

prorata  part  of  oil  to  be  run     rom  ea  h  1-.^.  t^»t      '^^^^^.^..^  „.„„,j  ,,  „„ 

he  4,000  barrels  which  I  was  •n^'™^;;'^  !;''j*„^ 

that  we  would  be  able  to  take  ^»J«;\^  ^Z''^,   ^'.^d   ,.roductU,u   of   the   Field 
For   example:   on   Apr.l    lB'/'f''';f^„^^;"4,o(,o  barrels  per  day,  or  34.3% 

omounted  to  11,645  barrels  and  we  -'^^^^^e  Oil  Co.  on  the  Wirt  Franklin 

trre'r^Ctt'^O^br-s  p^dfy-therefore,  we  would  only  take  from 

"The'esur.:;:dproduo,ion  is  se<.ured  from  the  producers,  and  which  I  tblnU 
'^r  dan;'::tlmated  production  is  changed  according  to  increase  or  decrease 
every  two  or  three  days.  j^^^   r^eord  kept  as  to 

Between  March  2«th  and  Apr.l  l^^-Jl'^^ ^^^„^^^^  ..j.  „,«  and  in  ea.-h  and 
amount  to  be  run  fron,  each  '^"^rTZ  rZL  lease  than  another.  My  m- 
,very  ca^e  I  did  not  run  -"^  ""'^^  /j;'^^,^  of  the  4.000  barrels,  which  is 
structions  were  to  run  --f^^^uZtZ  production  between  the  above  dates. 

the  amount  we  were  t«/«'''^^;™  "  "'^    "j"    [^ey  have  a  full  tank. 

we  do  not  run  the  oil  from  the  leases  nnW  they  ^    ^^^^_^_^  _^^    ^^^  ^^„y 

particular  producer. 


i 


t 

/ 

% 


EXHIBITS. 


Exhibit  16. 


115 


LETTER  FROM  G.  W.  JENNINGS  TO  WIRT  FRANKLIN  CONCERNING 
CONDITIONS  IN  THE  HEALDTON  FIELD  MARCH  20,    1914. 


P 


Wirt  Franklin, 
Pre3. 


A.  T.  McGhee, 
Vice  Pres. 


Edward  Gait, 
©ec. 


Roy  M.  Johnson, 
'    Treas. 


CRYSTAL  OIL  COMPANY 

Capital  Stock  $50,000 

Directors: 
Wirt  Franklin 
A.  T.  McGhee 
Edward  Gnlt 
Roy  M.  Johnson 
S.  A.  Apple 

Ardmore,  Oklahoma,  3-20-1914. 

Mr.  Wirt  Franklin,  Pres., 

Ardmore,  Okla. 

Dear  Sir:  Reporting  on  the  investigation  of  the  pipe  lines  to  the  different 
tanks  in  the  field  in  the  Healdton  district.  Where  the  Magnolia  Pipe  Line  Co. 
have  their  lines  connected  to.  Our  tanks  on  the  Thomas  farm  in  Sec.  5-4-S- 
3-W  are  connected  with  two  inch  pipe  and  same  runs  out  50  feet  from  the 
tanks  and  connects  into  three  inch  pipe.  Same  being  a  gravity  line  and  it 
takes  from  three  to  four  days  to  get  a  1600  bbl.  tank  of  oil  in  the  line. 

The  Red  River  Oil  Co.,  west  of  the  Thomas  farm  have  the  same  connections 
as  we  have  only  they  have  a  small  steam  pump  which  is  run  by  gas,  size  of  the 

pump  7^ixl. 

Paraffine  Oil  Co.,  in  the  Southwest  i  of  the  South  West  J  of  Sec.  5-4-S-3-W, 
have  their  tanks  connected  with  two  inch  pipe  going  into  three  inch  inpe,  and 
same  being  a  gravity  line. 

Red  River  Oil  Company  in  the  N.  E.  i  of  Sec.  8-4-S-3-W  on  the  Apple  & 
Franklin  farm,  tanks  are  located  on  the  bottom  land  in  the  north  corner  of 
the  farm,  tanks  are  connected  up  with  two  inch  pipe  going  into  four  inch 
almost  at  the  tanks. 

But  the  Pipe  Line  Co.  today  are  laying  a  six  inch  line  up  the  bottom  going 

south  towards  tlie  Red  River  Tanks  in  Sec.  8. 

Humble  Oil  Co.  in  the  N.  W.  i  of  Sec.  9,  4-S-3-W,  have  the  same  connections 
being  two  and  three  inch  pipe.    And  being  a  gravity  line. 

Watchorn  Oil  Co.  in  the  S.  W.  \  of  Sec.  4.4-S-3W  have  two  and  three  inch 
connections  and  oil  goes  out  by  gravity. 

Wrightsman  &  Foster  Oil  Co.  in  the  N.  E.  i  of  Sec.  5.4S-5W,  have  a  battery 
of  three  1600  bbl.  tanks  connected  with  two  and  three  inch  pipe  and  oil  run 

by  gravity. 

Ideal  Oil  Co.  in  the  S.  W.  i  of  Sec.  32,  3S-3W,  just  north  of  the  Wrightsman 
&  Foster  Oil  Co.  in  Sec.  5  have  two  1600  bbl.  tanks  connected  with  two  and 
three  inch  pipe,  and  oil  run  by  gravity.  The  six  inch  line  runs  east  and  west 
between  Sec.  32  and  5  and  the  three  inch  lines  connect  to  the  six  inch  line. 


* 

■^ 


116 


CONDITIONS  IN   THE   HEALDTON   OIL  FIELD. 


The  Ideal  and  the  Wrightsman  &  Foster  Cos.  lines  to  their  tanks  have  check 
valves  ou  their  Hues,  at  the  tanks.     And  all  other  companies  have  checks  at 

the  tanks. 

The  Ideal  Company  has  one  1600  tank  on  the  line. 

The  McMan  Oil  Co.  just  west  of  the  Ideal  Co.  in  the  same  Sec.  had  a  battery 
of  tive  250  bbl.  tanks  for  a  production  of  from  1200  bbls  to  1500  per  day  with 
two  tanks  on  the  line  being  punipe<l  out  by  the  regulation  field  pump,  this  oil 
had  to  pass  by  the  Ideal  Co.  on  the  way  to  the  Station. 

None  of  the  tanks  on  the  McMan  lease  were  locked  or  sealed.  All  other  tanks 
in  the  field  were  and  are  locked  when  not  on  the  line. 

The  1011  Oil  Co.  in  the  same  Sec.  32  joining  the  McMan  Oil  Co.  on  the  west, 
Kame  part  of  the  i  have  a  battery  of  5-1600  bbl.  and  4-250  bbl.  tanks  with 
smaller  production  than  the  McMan  Oil  Co.  The  1911  Oil  Co.  have  their  tanks 
connected  with  two  and  three  inch  lines  running  west  to  the  six  inch  line,  this 
oil   runs  by  gravity  and  has  to  pass  the  McMan  tanks  on  the  way  to  the 

Station. 

The  Producers  Oil  Co.  in  the  S.  E.  i  of  the  SW.  1  of  Sec.  32,  joining  the 
1911  Oil  Co.  ou  the  west  have  two  1600  tanks,  one  was  on  the  line  the  stop  was 
open  and  running  by  gravity.  This  oil  had  to  pass  by  the  McMan  tanks  where 
the  pump  was  running. 

So  after  seeing  what  I  have  today,  I  think  the  matter  of  running  our  oil 
needs  your  attention,  see  if  you  cannot  get  us  a  pump  and  we  will  get  out  the 

oil. 

Yours  very  truly, 

Crystal  Oil  Co., 

G.  W.  Jennings,  8upt, 

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